SoK Lending Pools in Decentralized Finance

Massimo Bartoletti, James Hsin yu Chiang*, Alberto Lluch Lafuente

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingArticle in proceedingsResearchpeer-review

360 Downloads (Pure)

Abstract

Lending pools are decentralized applications which allow mutually untrusted users to lend and borrow crypto-assets. These applications feature complex, highly parametric incentive mechanisms to equilibrate the loan market. This complexity makes the behaviour of lending pools difficult to understand and to predict: indeed, ineffective incentives and attacks could potentially lead to emergent unwanted behaviours. Reasoning about lending pools is made even harder by the lack of executable models of their behaviour: to precisely understand how users interact with lending pools, eventually one has to inspect their implementations, where the incentive mechanisms are intertwined with low-level implementation details. Further, the variety of existing implementations makes it difficult to distill the common aspects of lending pools. We systematize the existing knowledge about lending pools, leveraging a new formal model of interactions with users, which reflects the archetypal features of mainstream implementations. This enables us to prove some general properties of lending pools, and to precisely describe vulnerabilities and attacks. We also discuss the role of lending pools in the broader context of decentralized finance and identify relevant research challenges.

Original languageEnglish
Title of host publicationFinancial Cryptography and Data Security
EditorsMatthew Bernhard, Andrea Bracciali, Lewis Gudgeon, Thomas Haines, Ariah Klages-Mundt, Shin'ichiro Matsuo, Daniel Perez, Massimiliano Sala, Sam Werner
PublisherSpringer
Publication date2021
Pages553-578
ISBN (Print)9783662639573
DOIs
Publication statusPublished - 2021
Event2nd Workshop on Coordination of Decentralized Finance - Virtual event
Duration: 5 Mar 20215 Mar 2021

Conference

Conference2nd Workshop on Coordination of Decentralized Finance
LocationVirtual event
Period05/03/202105/03/2021
SeriesLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume12676 LNCS
ISSN0302-9743

Bibliographical note

Funding Information:
Massimo Bartoletti is partially supported by Conv. Fondazione di Sardegna & Atenei Sardi project F74I19000900007 ADAM. James Hsin-yu Chiang is supported by the PhD School of DTU Compute. Alberto Lluch Lafuente is partially supported by the EU H2020-SU-ICT-03-2018 Project No. 830929 CyberSec4Europe (cybersec4europe.eu).

Funding Information:
Acknowledgements. Massimo Bartoletti is partially supported by Conv. Fondazione

Publisher Copyright:
© 2021, International Financial Cryptography Association.

Fingerprint

Dive into the research topics of 'SoK Lending Pools in Decentralized Finance'. Together they form a unique fingerprint.

Cite this