We coin the term *Protocols for Loanable Funds (PLFs)* to refer to protocols which establish distributed ledger-based markets for loanable funds. PLFs are emerging as one of the main applications within Decentralized Finance (DeFi), and use smart contract code to facilitate the intermediation of loanable funds. In doing so, these protocols allow agents to borrow and save programmatically. Within these protocols, interest rate mechanisms seek to equilibrate the supply and demand for funds. In this paper, we review the methodologies used to set interest rates on three prominent DeFi PLFs, namely Compound, Aave and dYdX. We provide an empirical examination of how these interest rate rules have behaved since their inception in response to differing degrees of liquidity. We then investigate the market efficiency and inter-connectedness between multiple protocols, examining first whether Uncovered Interest Parity holds within a particular protocol and second whether the interest rates for a particular token market show dependence across protocols, developing a Vector Error Correction Model for the dynamics.

中文翻译：

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可贷资金的 DeFi 协议：利率、流动性和市场效率

我们创造了术语*可贷资金协议 (PLF)* 来指代为可贷资金建立基于分布式账本的市场的协议。PLF 正在成为去中心化金融 (DeFi) 中的主要应用之一，并使用智能合约代码来促进可贷资金的中介。在这样做时，这些协议允许代理以编程方式借用和保存。在这些协议中，利率机制寻求平衡资金的供求。在本文中，我们回顾了用于为三个著名的 DeFi PLF（即 Compound、Aave 和 dYdX）设定利率的方法。我们对这些利率规则自成立以来如何应对不同程度的流动性进行了实证检验。