Template-Type: ReDIF-Paper 1.0
Author-Name: Giulio Cornelli
Author-X-Name-First: Giulio
Author-X-Name-Last: Cornelli
Author-Name: Leonardo Gambacorta
Author-X-Name-First: Leonardo
Author-X-Name-Last: Gambacorta
Author-Name: Rodney Garratt
Author-X-Name-First: Rodney
Author-X-Name-Last: Garratt
Author-Name: Alessio Reghezza
Author-X-Name-First: Alessio
Author-X-Name-Last: Reghezza
Title: Why DeFi lending? Evidence from Aave V2
Abstract: Decentralised finance (DeFi) lending protocols have experienced significant growth recently, yet the motivations driving investors remain largely unexplored. We use granular, transaction-level data from Aave, a leading player in the DeFi lending market, to study these motivations. Our theoretical and empirical findings reveal that the search for yield predominantly drives liquidity provision in DeFi lending pools, whereas borrowing activity is mainly influenced by speculative and, to some extent, governance motives. Both retail- and large investors seek potential high returns through market movements and price speculation, however the latter engage in DeFi borrowing relatively more than the former also to influence protocol decisions and accrue more significant governance rights.
Creation-Date: 2024-05
File-URL: https://www.bis.org/publ/work1183.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1183.htm
File-Format: text/html
Number: 1183
Keywords: cryptocurrency, DeFi, decentralized finance, lending
Classification-JEL: G18, G23, O39
Handle: RePEc:bis:biswps:1183