Dr Fahad Saleh, Wake Forest University

"Equilibrium in a DeFi Lending Market"
Friday, 26 May, 2 pm
Wards Library, Main Building

Abstract

We study lending on a blockchain facilitated by an algorithm known as a Protocol for Loanable Funds (PLF). PLFs suffer a disadvantage when compared to traditional lending platforms, given their inability to incorporate off-chain information into the borrowing and lending rates that they set. For this reason, for a pre-determined PLF interest rate function, the associated equilibrium is sub-optimal when compared to a competitive lending market equilibrium. We nonetheless show that an optimally designed PLF interest rate function is able to generate equilibrium interest rates, and therefore welfare, that is arbitrarily close to a competitive lending market equilibrium.

Bio

Fahad Saleh is an Associate Professor of Finance and the Nunnenkamp-Cinelli Faculty Fellow at Wake Forest University. He is also an Associate Editor at Management Science, a co-organizer of the Crypto and Blockchain Economics Research (CBER) Forum and a member of the Finance Theory Group. His research centres upon economic questions associated with blockchain and has been published in leading academic journals such as Management Science, the Review of Financial Studies and the Journal of Financial Economics.

For further information, please contact business-school-research@glasgow.ac.uk

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First published: 28 March 2023

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