Featured Work

Aug 12, 2025

Thomas Rivera, Fahad Saleh, Quentin Vandeweyer | Working Paper No. 00180-00

Equilibrium in a DeFi Lending Market

We develop a model of Decentralized Finance (DeFi) lending platforms that set interest rates as programmable functions of the utilization of available funds. These platforms are unable to incorporate off-chain information into the platform’s interest rates, leading to inefficient DeFi equilibria that feature excess demand or supply. Absent uncertainty about withdrawals, these inefficiencies can be made arbitrarily small through an interest rate function that is...