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Understanding the DeFi Network Through the Lens of a Production-Network Model

Author

Listed:
  • Jonathan Chiu

    (Bank of Canada)

  • Thorsten V. Koeppl

    (Queen's University)

  • Hanna Yu

    (Bank of Canada)

  • Shengxing Zhang

    (Peking University HSBC Business School)

Abstract

Decentralized Finance (DeFi) is composed of a variety of heterogeneous sectors that are interconnected through an input-output network of its tokens. We use a panel data set to empricially document the evolution of the DeFi network across its different sectors. We then employ a standard, theoretical production-network model to measure the value added and service outputs of different DeFi sectors which is fundamentally different from the commonly used metric of Total Value Locked (TVL). Our calibrated model is then used to study DeFi token prices and to predict the equilibrium effects of increasing network interconnectedness.

Suggested Citation

  • Jonathan Chiu & Thorsten V. Koeppl & Hanna Yu & Shengxing Zhang, 2023. "Understanding the DeFi Network Through the Lens of a Production-Network Model," Working Paper 1509, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1509
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1509.pdf
    File Function: First version 2023
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    Citations

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    Cited by:

    1. Yichen Luo & Yebo Feng & Jiahua Xu & Paolo Tasca, 2024. "Piercing the Veil of TVL: DeFi Reappraised," Papers 2404.11745, arXiv.org, revised May 2024.

    More about this item

    Keywords

    Blockchain; Crypto; Decentralized Finance; Production Network;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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