Blockchain-based DeFi lending: A challenge to traditional finance?
| Author: | Bc. Ondřej Knížek |
|---|---|
| Year: | 2022 - summer |
| Leaders: | Mgr. Magda Pečená Ph.D. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 68 |
| Awards and prizes: | |
| Link: | https://dspace.cuni.cz/handle/20.500.11956/175672 |
| 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 loans. |
