Related papers: StableSims: Optimizing MakerDAO Liquidations 2.0 I…
In decentralized finance (DeFi), stablecoins like DAI are designed to offer a stable value amidst the fluctuating nature of cryptocurrencies. We examine the class of crypto-backed stable derivatives, with a focus on mechanisms for price…
Stablecoins have turned out to be the "killer" use case of the growing digital asset space. However, risk management frameworks, including regulatory ones, have been largely absent. In this paper, we address the critical question of…
Stablecoins - crypto tokens whose value is pegged to a real-world asset such as the US Dollar - are an important component of the DeFi ecosystem as they mitigate the impact of token price volatility. In crypto-backed stablecoins, the peg is…
Ethereum 2.0 is the second-largest cryptocurrency by market capitalization and a widely used smart contract platform. Therefore, examining the reliability of Ethereum 2.0's incentive mechanism is crucial, particularly its effectiveness in…
We model incentive security in non-custodial stablecoins and derive conditions for participation in a stablecoin system across risk absorbers (vaults/CDPs) and holders of governance tokens. We apply option pricing theory to derive closed…
Stablecoins are digital assets designed to maintain a stable value, typically pegged to traditional currencies. Despite their growing prominence, many stablecoins have struggled to consistently meet stability expectations, and their…
Stablecoins are a class of cryptocurrencies which aim at providing consistency and predictability, typically by pegging the token's value to that of a real world asset. Designing resilient decentralized stablecoins is a challenge, and…
This paper studies liquid staking tokens (LSTs) on automated market makers (AMMs), both theoretically and empirically. LSTs are tokenized representations of staked assets on proof-of-stake blockchains. First, we model LST-liquidity on AMMs…
We assess the market risk of the DeFi lending protocols using a multi-asset agent-based model to simulate ensembles of users subject to price-driven liquidation risk. Our multi-asset methodology shows that the protocol's systemic risk is…
Consider a setting where selfish agents are to be assigned to coalitions or projects from a fixed set P. Each project k is characterized by a valuation function; v_k(S) is the value generated by a set S of agents working on project k. We…
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…
We develop a model of stable assets, including non-custodial stablecoins backed by cryptocurrencies. Such stablecoins are popular methods for bootstrapping price stability within public blockchain settings. We derive fundamental results…
Execution Tickets are currently discussed as a next evolutionary step in Ethereum's block space allocation mechanism, separating consensus rewards from execution rewards and selling execution rights through a dedicated market. We present a…
Financial speculators often seek to increase their potential gains with leverage. Debt is a popular form of leverage, and with over 39.88B USD of total value locked (TVL), the Decentralized Finance (DeFi) lending markets are thriving.…
An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as…
In this paper, we explore the short- and long-term stability of backed stablecoins offering constant mint and redeem prices to all agents. We refer to such designs as price window-based, since the mint and redeem prices constrain the…
The Maker Protocol is a decentralized finance application that enables collateralized lending. The application uses open-bid, second-price auctions to complete its loan liquidation process. In this paper, we develop a bidding function for…
DAG-based DLTs allow for parallel, asynchronous writing access to a ledger. Consequently, the perception of the most recent blocks may differ considerably between nodes, and the underlying network properties of the P2P layer have a direct…
Blockchain systems, such as Ethereum, are increasingly adopting layer-2 scaling solutions to improve transaction throughput and reduce fees. One popular layer-2 approach is the Optimistic Rollup, which relies on a mechanism known as a…
Stablecoins, which are primarily intended to function as a global reserve of value are insubstantial in their design and present many failure points. The primary mechanism to enable these coins to hold on to a fixed value is by backing them…