2023-11-22
82 minutes

Ava Labs x CBER Ep 4: Economics of Lending Platforms

About this episode

This episode discusses lending platforms on blockchains. Thomas Rivera (McGill University) and Quentin Vandeweyer (University of Chicago) explain that lending platforms generate sub-optimal welfare due to under-utilization of funds that are lent to the platform. To provide more context, lending platforms are specified in such a way that the level of borrowing (relative to lending) necessarily fluctuates with market conditions, resulting in instances where borrowing is significantly below lending. Importantly, when borrowing is significantly below lending, the total interest accrued from borrowers (relative to lending volume) is necessarily low, yielding low interest rates for lenders and thereby discouraging lending. Potential improvements for lending platforms are discussed.

Paper: Equilibrium in a DeFi Lending Market

Guests

Thomas Rivera

Thomas Rivera

Assistant Professor of Finance at the Desautels Faculty of Management, McGill University.

Quentin Vandeweyer

Quentin Vandeweyer

Assistant Professor of Finance and Fama Faculty Fellow at the University of Chicago.

Andreas Park

Andreas Park

Professor of Finance, University of Toronto.

Fahad Saleh

Fahad Saleh

Associate Professor of Finance and the Nunnenkamp-Cinelli Faculty Fellow at Wake Forest University.

About our guest

Thomas Rivera is a Professor of Finance at the Desautels Faculty of Management of McGill University whose research broadly relates to theoretical topics on blockchain, decentralized finance, corporate finance, and banking/financial stability.

Quentin Vandeweyer is Professor of Finance and Fama Faculty Fellow at the University of Chicago: Booth School of Business. His research interests are in macro-finance, asset pricing, and monetary economics. In particular, his recent research focuses on understanding how financial innovation and regulation drive the development of financial institutions. Vandeweyer holds a Ph.D. in Economics from Sciences Po Paris and an MSc. in Economics from Ecole Polytechnique. Prior to joining Booth, he was working for the European Central Bank.

AVALABS x CBER

Owl Explains by Ava Labs and the Crypto and Blockchain Economic Research (CBER) Forum are proud to announce the Crafting the Crypto Economy podcast series. Episodes feature deep dives into notable research subjects such as lending platform economics, DEX design, DAO governance, and much more. By highlighting major research efforts, the series aims to unveil useful learning, explain complex topics, and educate a wide range of listeners, from beginners to professionals. Most of all, the podcast will equip lawmakers and regulators with the additional tools and knowledge they need to effectively and sensibly shape workable blockchain policies that maximally benefit all parties.