Formal Analysis of Lending Pools in Decentralized Finance

  title={Formal Analysis of Lending Pools in Decentralized Finance},
  author={Massimo Bartoletti and James Hsin-yu Chiang and Tommi A. Junttila and Alberto Lluch-Lafuente and Massimiliano Mirelli and Andrea Vandin},
. Decentralised Finance (DeFi) applications constitute an entire financial ecosystem deployed on blockchains. Such applications are based on complex protocols and incentive mechanisms whose financial safety is hard to determine. Besides, their adoption is rapidly growing, hence imperilling an increasingly higher amount of assets. Therefore, accurate formalisation and verification of DeFi applications is essential to assess their safety. We have developed a tool for the formal analysis of one of… 



A Maude simulator for Lending Pools

  • https://github. com/MMirelli/maude-lp (2021),
  • 2021

Options, Futures, and Other Derivatives

Contents: Introduction. Futures Markets and the Use of Futures for Hedging. Forward and Futures Prices. Interest Rate Futures. Swaps. Options Markets. Properties of Stock Option Prices. Trading

Compound protocol maximum liquidate threshold

  • compound-protocol/blob/4e99ea3a64ab4f1bdf9c07c7a1bf325db09ab809/ scenario/src/Event/ComptrollerEvent.ts#L170
  • 2021

Compound: The money market protocol

  • https://
  • 2019

Maude manual (version 3.0)

  • Tech. rep.,
  • 2020

Aave protocol maximum liquidate threshold

  • 1ff8418eb5c73ce233ac44bfb7541d07828b273f/contracts/lendingpool/ LendingPoolLiquidationManager.sol#L181
  • 2021

Aave whitepaper

  • 2021

SoK: Decentralized Finance (DeFi)

A distinction between technical security and economic security is provided, connecting the latter with new models and thereby synthesizing insights from computer science, econom-ics and finance, and the open research challenges in the ecosystem across these security types are outlined.

An Analysis of the Market Risk to Participants in the Compound Protocol

The results showed that the Compound protocol is able to scale to a large market size while having a low probability of default under volatile market conditions and that the current protocol parameters for specifying the minimum collateral requirements and liquidation incentives are sufficient for liquid collateral assets.

The Decentralized Financial Crisis

This paper explores how design weaknesses and price fluctuations in DeFi protocols could lead to a DeFi crisis, and develops a stress-testing framework for a stylized DeFi lending protocol, focusing on the impact of a drying-up of liquidity on protocol solvency.