A recent study by the Bank for International Settlements (BIS) sought to scrutinize the behavior of borrowers in the DeFi space, one half of the equation that powers tens of billions of dollars TVL in lending protocols.
The study, which purports to be the first to examine the intricacies of user behavior as well as the dynamics of DeFi lending, emphasizes the importance of understanding such behaviors given increased interest among tradfi institutions to tokenize assets like bonds and securities.
Interestingly, one of the report’s findings was that many borrowers prefer to avoid over-leveraging due to the clear and present risk of forced closure and auto-liquidation, whereupon their underlying collateral is sold by the protocol in question. Of course, a minority of borrowers still engage in risky leverage that can wipe them out at any moment due to the crypto market’s inherent volatility.
A Growing DeFi Conservatism
It should be noted that the study only looked at data up until Mar

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