The Economics of the DeLend Project: Agent-based Simulations

Paper: arXiv 2303.03214

Authors: Frederico Dutilh Novaes, Gabriel de Abreu Madeira, Aurimar Cerqueira

Abstract

This paper presents our methodology to simulate the behavior of the DeLend Platform. Such simulations are important to verify if the system is able to connect the different sets of agents linked to the platform in a functional manner. They also provide inputs to guide the choices of operational parameters, such as the platform spread, and strategies by DeLend, since they estimate how the key variables of interest respond to different policies. We discuss the methodology and provide examples meant to clarify the approach and to how we intend to use the tool in practice – they should not be interpreted as representative of real life scenarios.

Complexity vs Empirical Score

• Math Complexity: 3.5/10
• Empirical Rigor: 3.0/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper outlines a stylized agent-based modeling framework for a decentralized lending protocol, focusing on platform spread and agent interaction concepts. However, it lacks formal mathematical derivations and relies on toy examples rather than rigorous empirical data or backtesting against real-world scenarios.

Research Flowchart

  flowchart TD
    A["Research Goal: Verify DeLend platform functionality & optimize operational parameters"] --> B["Data Inputs: Crypto market dynamics & agent behavioral strategies"]
    B --> C["Methodology: Agent-Based Modeling ABM simulation"]
    C --> D["Computational Process: Simulate interactions among agents across spread policies"]
    D --> E["Key Outcomes: Framework for parameter optimization & protocol risk mitigation"]