Work detail

Blockchain-based DeFi lending: A challenge to traditional finance?

Author: Bc. Ondřej Knížek
Year: 2022 - summer
Leaders: Mgr. Magda Pečená Ph.D.
Work type: Bachelors
Language: English
Pages: 68
Awards and prizes:
Abstract: The goal of the thesis is to identify the factors that determine the default rate of the loans, with
a particular focus on the pioneering research of blockchain-based decentralised loans. The
thesis describes blockchain technology, its development, and functions, introduces
decentralised finance (DeFi), and examines its advantages and challenges. The thesis's
analytic part compares DeFi loans and peer-to-peer loans as an alternative to the traditional
financial system. The blockchain-based DeFi loans realized through lending Compound are
analysed by a logit model that predicts liquidation rate and examines if it is possible to
perform the prediction without any information about the borrower due to the complete
anonymity in DeFi lending. To illustrate the difference, the data from the Czech peer-to-peer
lending platform Zonky was used to set up two logit models. While the first model uses all
available variables, the second model is based only on loan-related variables to achieve a
more precise comparison to DeFi loans. Results revealed several statistically significant
determinants of default rate in the case of all three models. While the results of the Compound
model cannot be compared with the existing literature, the default rate determinants in the
case of peer-to-peer loans confirm the conclusions of previous research. The model's
prediction accuracy performance confirms the importance of borrower-related information.
Nevertheless, it shows that a sufficient prediction model may also be set in the case of DeFi
June 2023


Česká Spořitelna


Patria Finance