Related papers: Zero-Liquidation Loans: A Structured Product Appro…
Decentralized Finance (DeFi) is a new financial industry built on blockchain technologies. Decentralized financial services have consequently increased the ability to lend, borrow, and invest in decentralized investment vehicles, allowing…
Blockchain solutions typically assume a synchronous network to ensure consistency and achieve consensus. In contrast, offline transaction systems aim to enable users to agree on and execute transactions without assuming bounded…
In decentralized finance (DeFi), lenders can offer flash loans to borrowers, i.e., loans that are only valid within a blockchain transaction and must be repaid with fees by the end of that transaction. Unlike normal loans, flash loans allow…
Liquidation of collateral are the primary safeguard for solvency of lending protocols in decentralized finance. However, the mechanics of liquidations expose these protocols to predatory price manipulations and other forms of Maximal…
Blockchain-based decentralised lending is a rapidly growing and evolving alternative to traditional lending, but it poses new risks. To mitigate these risks, lending protocols have integrated automated risk management tools into their smart…
In decentralized non-custodial micropayments, the central challenge is not whether payments can be executed directly, but under what conditions such systems can offer credit limits without requiring full collateral backing. Existing…
We present the first formal treatment of \emph{yield tokenization}, a mechanism that decomposes yield-bearing assets into principal and yield components to facilitate risk transfer and price discovery in decentralized finance (DeFi). We…
Smart contracts - computer protocols that regulate the exchange of crypto-assets in trustless environments - have become popular with the spread of blockchain technologies. A landmark security property of smart contracts is liquidity: in a…
The limit order book mechanism has been the core trading mechanism of the modern financial market. In the cryptocurrency market, centralized exchanges also adopt this limit order book mechanism and a centralized matching engine dynamically…
Financial options are fundamental to traditional markets, enabling strategies ranging from hedging to speculating. Yet, while the Automated Market Maker paradigm has revolutionized decentralized spot markets, no equivalent standard has…
We consider an equity market subject to risk from both unhedgeable shocks and default. The novelty of our work is that to partially offset default risk, investors may dynamically trade in a credit default swap (CDS) market. Assuming…
We propose a middleware solution designed to facilitate seamless integration of privacy using zero-knowledge proofs within various multi-chain protocols, encompassing domains such as DeFi, gaming, social networks, DAOs, e-commerce, and the…
In Decentralized Finance (DeFi), automated market makers typically implement liquidity provisioning protocols. These protocols allow third-party liquidity providers (LPs) to provide assets to facilitate trade in exchange for fees. This…
We consider Geometric Mean Market Makers -- a special type of Decentralized Exchange -- with two types of users: liquidity takers and arbitrageurs. Liquidity takers trade at prices that can create arbitrage opportunities, while arbitrageurs…
Decentralized lending protocols within the decentralized finance ecosystem enable the lending and borrowing of crypto-assets without relying on traditional intermediaries. Interest rates in these protocols are set algorithmically and…
In this chapter structures that generate yield in cryptofinance will be analyzed and related to leverage. While the majority of crypto-assets do not have intrinsic yields in and of themselves, similar to cash holdings of fiat currency,…
The authors examine the concept of probability of default for asset-backed loans. In contrast to unsecured loans it is shown that probability of default can be defined as either a measure of the likelihood of the borrower failing to make…
Three traits of decentralized finance are studied. First, the market impact function is derived for optimal-growth liquidity providers. For a standard random walk, the classic square-root impact is recovered. An extension is then derived to…
We study the loan contracts offered by decentralised loan protocols (DLPs) through the lens of financial derivatives. DLPs, which effectively are clearinghouses, facilitate transactions between option buyers (i.e. borrowers) and option…
Recently emerging Decentralized Finance (DeFi) takes the promise of cryptocurrencies a step further, leveraging their decentralized networks to transform traditional financial products into trustless and transparent protocols that run…