DeFi Lending During The Merge

Heimbach, Lioba; Schertenleib, Eric; Wattenhofer, Roger

doi:10.2139/ssrn.4341346

Cited by 7 publications

(8 citation statements)

References 16 publications

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“…The cumulative amount staked in Lido can be seen in Figure 3. (Heimbach et al [13] note that Lido can also be staked, and that nearly 20% was locked into DeFi lending protocols during the merge, creating a potential for mass liquidations.) There are also off-chain solutions for retail staking, namely through centralized exchanges.…”

Section: Validatorsmentioning

confidence: 99%

An Event Study of the Ethereum Transition to Proof-of-Stake

Kapengut

Mizrach

2023

Commodities

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On 15 September 2022, the Ethereum network adopted a proof-of-stake (PoS) consensus mechanism. We study the impact on the network and competing platforms in a two month event window around the Beacon chain merge. We find that the transition to PoS has reduced energy consumption by 99.98%. Miners have not transformed into validators, and total block reward income (in USD) has fallen by 97%, though transaction fees (in ETH) for Ether have increased nearly 10%. The Herfindahl index for the top 10 is 1009; the network is 19% less concentrated after the merge. Ethereum supply growth has been deflationary since the merge. The time between consecutive blocks is now steady at 12 s and transactions per day are up 7.0%. On Polygon, Matic fees rose but token fees fell. Polygon also slows, processing 3.3% fewer transactions per day. Solana’s fees fall by $0.0003, and transactions per day are down 48%. Stablecoin transfer volumes fall on Ethereum and Polygon, but rise on Solana.

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Section: Validatorsmentioning

confidence: 99%

An Event Study of the Ethereum Transition to Proof-of-Stake

Kapengut

Mizrach

2023

Commodities

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“…Interest is a payment for capital borrowed from third parties (Heimbach et al, 2023). The interest rate is the amount of interest represented as a percentage of capital.…”

Section: Theoretical Reviewmentioning

confidence: 99%

Department of Management, Faculty of Business Economics, Universitas Muhammadiyah Jember

Satoto

2024

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The supply chain of mining businesses listed on the Indonesia Stock Exchange (IDX) has declined due to the significant impact brought about by the uncertainty of an increasingly complex world economic climate. This study aims to determine the relationship between interest rates, inflation, currency exchange rates, stock returns, and firm value. Structural Equation Modeling (SEM) analysis was conducted to decipher the data in this study. The research findings show that the mining industry in Indonesia is highly influenced by macroeconomic factors, especially interest rates, inflation, and exchange rates. The negative relationship between interest rates and inflation negatively affects stock returns and firm value. Meanwhile, it increased the rupiah's value positively and significantly influenced stock returns and business value. Higher stock returns can increase the value of mining companies listed on the Indonesia Stock Exchange (IDX).

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“…Heimbach et al [22] investigate the effects of the Merge on Ether rates on AAVE and Compund. They discuss how the DAOs of the respective protocols took actions to prevent exorbitant rates leading to mass liquidations.…”

Section: Related Workmentioning

confidence: 99%

“…What, however, could cause potentially fatal delays is AAVE's reliance on comparatively slow moving DAO votes. While the protocol has a proven trackrecord of successfully updating its risk parameters to face changing market environment such as during the Merge [22], these changes do require a few days. In this instance, AAVE was not oblivious to the threats of Eisenberg's proposed attack and froze borrowing of assets like REN (yellow points in Figure 3) only weeks after Eisenberg mused about this potential attack [4].…”

Section: Aftermathmentioning

confidence: 99%

Short Squeeze in DeFi Lending Market: Decentralization in Jeopardy?

Heimbach¹,

Schertenleib²,

Wattenhofer³

2023

Preprint

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Anxiety levels in the AAVE community spiked in November 2022 as Avi Eisenberg performed an attack on AAVE. Eisenberg attempted to short the CRV token by using funds borrowed on the protocol to artificially deflate the value of CRV. While the attack was ultimately unsuccessful, it left the AAVE community scared and even raised question marks regarding the feasibility of large lending platforms under decentralized governance.In this work, we analyze Avi Eisenberg's actions and show how he was able to artificially lower the price of CRV by selling large quantities of borrowed CRV for stablecoins on both decentralized and centralized exchanges. Despite the failure of his attack, it still led to approximately 1.6 Mio USD of irretrievable debt and, thereby, quadrupled the protocol's irretrievable debt. Furthermore, we highlight that his attack was enabled by the vast proportion of CRV available to borrow as well as AAVE's lending protocol design hindering rapid intervention. We stress Eisenberg's attack exposes a predicament of large DeFi lending protocols: limit the scope or compromise on 'decentralization'.

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DeFi Lending During The Merge

Cited by 7 publications

References 16 publications

An Event Study of the Ethereum Transition to Proof-of-Stake

An Event Study of the Ethereum Transition to Proof-of-Stake

Department of Management, Faculty of Business Economics, Universitas Muhammadiyah Jember

Short Squeeze in DeFi Lending Market: Decentralization in Jeopardy?

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