Paper proposes fixed-rate permissionless lending with repayment guarantees
Original title: Performance Guarantees for Permissionless Lending
Loans keep a fixed rate, and liquidation and shortfall odds are derived by treating collateral value as a random walk.
The paper proposes a permissionless lending protocol in which lenders and borrowers post competing interest-rate offers instead of using rates set partly by a pool operator. Loans keep a fixed rate for their term, which the authors say removes rate-manipulation risk found in pool protocols such as Aave and Compound. Liquidation and repayment-shortfall probabilities are given as exact integrals from characteristic functions, then illustrated by fitting historical Bitcoin prices to Gaussian, Student-t, and symmetric stable Paretian distributions.
Unconfirmed: Performance figures are theoretical guarantees and a fitted historical illustration, not observed protocol losses.
- Competing offers are meant to discover the rate without a central setter.
- Collateral value is modeled as a random walk.
- The empirical illustration uses Bitcoin price history under three distributions.
- Aave and Compound are cited as pool-based comparisons, not as compromised systems.
From the original article
1 min read at arxiv.orgWe propose a lending protocol with far fewer risks than existing pool-based lending protocols (e. g. , Aave, Compound).
By Nanqiao Wang · arxiv.org
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