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DeFi Survival Analysis: Insights into Risks and User Behaviors

In: Mathematical Research for Blockchain Economy

Author

Listed:
  • Aaron Green

    (Rensselaer Polytechnic Institute)

  • Christopher Cammilleri

    (Rensselaer Polytechnic Institute)

  • John S. Erickson

    (Rensselaer Polytechnic Institute)

  • Oshani Seneviratne

    (Rensselaer Polytechnic Institute)

  • Kristin P. Bennett

    (Rensselaer Polytechnic Institute)

Abstract

We propose a decentralized finance (DeFi) survival analysis approach for discovering and characterizing user behavior and risks in lending protocols. We demonstrate how to gather and prepare DeFi transaction data for survival analysis. We demonstrate our approach using transactions in AAVE, one of the largest lending protocols. We develop a DeFi survival analysis pipeline which first prepares transaction data for survival analysis through the selection of different index events (or transactions) and associated outcome events. Then we apply survival analysis statistical and visualization methods such as median survival times, Kaplan–Meier survival curves, and Cox hazard regression to gain insights into usage patterns and risks within the protocol. We show how by varying the index and outcome events, we can utilize DeFi survival analysis to answer three different questions. What do users do after a deposit? How long until borrows are first repaid or liquidated? How does coin type influence liquidation risk? The proposed DeFi survival analysis can easily be generalized to other DeFi lending protocols. By defining appropriate index and outcome events, DeFi survival analysis can be applied to any cryptocurrency protocol with transactions.

Suggested Citation

  • Aaron Green & Christopher Cammilleri & John S. Erickson & Oshani Seneviratne & Kristin P. Bennett, 2023. "DeFi Survival Analysis: Insights into Risks and User Behaviors," Lecture Notes in Operations Research, in: Panos Pardalos & Ilias Kotsireas & Yike Guo & William Knottenbelt (ed.), Mathematical Research for Blockchain Economy, pages 127-141, Springer.
    • Handle: RePEc:spr:lnopch:978-3-031-18679-0_8
    DOI: 10.1007/978-3-031-18679-0_8
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