The Monetary institution of Canada has released a working paper that examines lending protocols in decentralized finance unbiased about sources of instability and their relation to crypto asset prices. Its findings tag possible ways to optimize DeFi lending platforms, or presumably the handy limits of decentralization.
The authors of the paper, titled “On the Fragility of DeFi Lending” and released Feb. 22, acknowledge the inclusiveness DeFi offers and the benefits of orderly contract protocols over the employ of human discretion — but they additionally title the systemic weaknesses of DeFi. Data asymmetry, a key hassle for regulators, is highlighted, with the twist that in DeFi, the asymmetry favors the borrower:
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