DROPS

Document

DOI: 10.4230/OASIcs.Tokenomics.2022.5

Interest Rate Rules in Decentralized Finance: Evidence from Compound

Authors: Amit Chaudhary, Roman Kozhan, and Ganesh Viswanath-Natraj

Published in: OASIcs, Volume 110, 4th International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2022)

Abstract

We study the fundamentals of interest rate rules on the decentralized finance protocol Compound. Interest rates are set by the governance of the protocol, and are based on the utilization of an asset: which is the ratio of a cryptocurrency that is borrowed to its total supply in the protocol. We discuss factors that determine the slope parameters of interest rate rules. Slope parameters are typically higher for more volatile cryptocurrencies. We argue liquidation risk can explain the cross-sectional variation in interest rate rules. We also draw parallels between these rules to the demand for loanable funds in traditional money markets.

Cite as

Amit Chaudhary, Roman Kozhan, and Ganesh Viswanath-Natraj. Interest Rate Rules in Decentralized Finance: Evidence from Compound. In 4th International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2022). Open Access Series in Informatics (OASIcs), Volume 110, pp. 5:1-5:6, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

Copy BibTex To Clipboard

@InProceedings{chaudhary_et_al:OASIcs.Tokenomics.2022.5,
  author =	{Chaudhary, Amit and Kozhan, Roman and Viswanath-Natraj, Ganesh},
  title =	{{Interest Rate Rules in Decentralized Finance: Evidence from Compound}},
  booktitle =	{4th International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2022)},
  pages =	{5:1--5:6},
  series =	{Open Access Series in Informatics (OASIcs)},
  ISBN =	{978-3-95977-274-7},
  ISSN =	{2190-6807},
  year =	{2023},
  volume =	{110},
  editor =	{Amoussou-Guenou, Yackolley and Kiayias, Aggelos and Verdier, Marianne},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/OASIcs.Tokenomics.2022.5},
  URN =		{urn:nbn:de:0030-drops-184226},
  doi =		{10.4230/OASIcs.Tokenomics.2022.5},
  annote =	{Keywords: Cryptocurrency, decentralized finance lending protocols, monetary policy, stablecoins, governance token}
}

Document

DOI: 10.4230/OASIcs.Tokenomics.2021.11

Fundamentals of the MakerDAO Governance Token

Authors: Roman Kozhan and Ganesh Viswanath-Natraj

Published in: OASIcs, Volume 97, 3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021)

Abstract

We study the fundamentals governing the price of the MakerDAO governance token MKR. Governance tokens are minted in response to liquidations, and burned in response to growth in the system surplus. MKR tokens appreciate with an increase in system surplus and depreciate with a rise in systemic risk due to DAI liquidation spirals. We discuss incentive compatibility conditions that need to be satisfied for the protocol to maintain the DAI stablecoin peg.

Cite as

Roman Kozhan and Ganesh Viswanath-Natraj. Fundamentals of the MakerDAO Governance Token. In 3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021). Open Access Series in Informatics (OASIcs), Volume 97, pp. 11:1-11:5, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2022)

Copy BibTex To Clipboard

@InProceedings{kozhan_et_al:OASIcs.Tokenomics.2021.11,
  author =	{Kozhan, Roman and Viswanath-Natraj, Ganesh},
  title =	{{Fundamentals of the MakerDAO Governance Token}},
  booktitle =	{3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021)},
  pages =	{11:1--11:5},
  series =	{Open Access Series in Informatics (OASIcs)},
  ISBN =	{978-3-95977-220-4},
  ISSN =	{2190-6807},
  year =	{2022},
  volume =	{97},
  editor =	{Gramoli, Vincent and Halaburda, Hanna and Pass, Rafael},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/OASIcs.Tokenomics.2021.11},
  URN =		{urn:nbn:de:0030-drops-159082},
  doi =		{10.4230/OASIcs.Tokenomics.2021.11},
  annote =	{Keywords: Cryptocurrency, monetary policy, stablecoins, governance token}
}

Search Results

Documents authored by Viswanath-Natraj, Ganesh

Interest Rate Rules in Decentralized Finance: Evidence from Compound

Abstract

Cite as

Fundamentals of the MakerDAO Governance Token

Abstract

Cite as

Thanks for your feedback!

Could not send message