Researchers associated with the study performed by the Bank of Canada has revealed that the DeFi lending protocols and reported on the potential of mitigation.
The Central Bank of Canada has revealed a research paper that examined the main protocols of lending in DeFi with a regard to the sources of instability. They also took their relation to the asset prices of crypto into consideration in the research. The findings of the research revealed that the different ways to optimize the DeFi lending platforms.
The writer of this paper revealed on Feb 22 said that the inclusion of DeFi and some more of the benefits of the advanced protocols, there are some basic weaknesses of the decentralized finance that showed its colors. These findings are going to help people to optimize the platform that lends DeFi.
This happened as the borrowers are aware of the services and value of the assests that they can use like a collateral for loan. In addition to this, only the assets that has been tokenized will serve as collateral. These assets will be very volatile.
Fragile Nature Of DeFi Causing New Cures:
The prices and the liquidity produce a feedback loop, and the papers argue that the prices of any asset will affect the volume. Adding to that, the smart contacts will lack the human inputs and it can have bad effects too. The loan contracts usually can get modified by the officers. However, a few of these smart contacts are not flexible as the terms are prepared for real-time data. Therefore, even the slightest changes in such contracts will be done after a lengthy discussion.
Efficiency, flexibility and complexity are reduced compare to the traditional prices. These authors have used math to study the numbers of propositions to achieve the equilibrium in these markets.
