Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance

Ping Fan Ke; Ka Chung Ng

Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance

Ping Fan Ke, Ka Chung Ng

Research output: Chapter in Book/Conference Proceeding/Report › Conference Paper published in a book › peer-review

Abstract

Decentralized Finance (DeFi) emerged rapidly in recent years and provided open and transparent financial services to the public. Due to its popularity, it is not uncommon to see cybersecurity incidents in the DeFi landscape, yet the impact of such incidents is under-studied. In this paper, we examine two incidents in DeFi protocol that are mainly caused by misgovernance and mistake in the smart contract. By using the synthetic control method, we found that the incident in Alchemix did not have a significant effect on the total value locked (TVL) in the protocol, whereas the incident in Compound caused a 6.13% decrease in TVL. One factor that contributed to the difference in the result could be the incident response in social media platforms, and further study should investigate the possible moderating or mediating effects of public opinions and sentiment.

Original language	English
Title of host publication	International Conference on Information Systems, ICIS 2022
Subtitle of host publication	"Digitization for the Next Generation"
Publisher	Association for Information Systems
ISBN (Electronic)	9781713893615
Publication status	Published - 2022
Externally published	Yes
Event	43rd International Conference on Information Systems: Digitization for the Next Generation, ICIS 2022 - Copenhagen, Denmark Duration: 9 Dec 2022 → 14 Dec 2022

Publication series

Name	International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation"

Conference

Conference	43rd International Conference on Information Systems: Digitization for the Next Generation, ICIS 2022
Country/Territory	Denmark
City	Copenhagen
Period	9/12/22 → 14/12/22

Bibliographical note

Publisher Copyright:
© 2022 International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation". All Rights Reserved.

Keywords

DeFi
fat-finger error
incident response
misgovernance
synthetic control
total value locked

Cite this

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title = "Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance",

abstract = "Decentralized Finance (DeFi) emerged rapidly in recent years and provided open and transparent financial services to the public. Due to its popularity, it is not uncommon to see cybersecurity incidents in the DeFi landscape, yet the impact of such incidents is under-studied. In this paper, we examine two incidents in DeFi protocol that are mainly caused by misgovernance and mistake in the smart contract. By using the synthetic control method, we found that the incident in Alchemix did not have a significant effect on the total value locked (TVL) in the protocol, whereas the incident in Compound caused a 6.13\% decrease in TVL. One factor that contributed to the difference in the result could be the incident response in social media platforms, and further study should investigate the possible moderating or mediating effects of public opinions and sentiment.",

keywords = "DeFi, fat-finger error, incident response, misgovernance, synthetic control, total value locked",

author = "Ke, \{Ping Fan\} and Ng, \{Ka Chung\}",

note = "Publisher Copyright: {\textcopyright} 2022 International Conference on Information Systems, ICIS 2022: {"}Digitization for the Next Generation{"}. All Rights Reserved.; 43rd International Conference on Information Systems: Digitization for the Next Generation, ICIS 2022 ; Conference date: 09-12-2022 Through 14-12-2022",

year = "2022",

language = "English",

series = "International Conference on Information Systems, ICIS 2022: {"}Digitization for the Next Generation{"}",

publisher = "Association for Information Systems",

booktitle = "International Conference on Information Systems, ICIS 2022",

}

Ke, PF & Ng, KC 2022, Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance. in International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation". International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation", Association for Information Systems, 43rd International Conference on Information Systems: Digitization for the Next Generation, ICIS 2022, Copenhagen, Denmark, 9/12/22.

Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance. / Ke, Ping Fan; Ng, Ka Chung.
International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation". Association for Information Systems, 2022. (International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation").

Research output: Chapter in Book/Conference Proceeding/Report › Conference Paper published in a book › peer-review

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T1 - Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance

AU - Ke, Ping Fan

AU - Ng, Ka Chung

PY - 2022

Y1 - 2022

N2 - Decentralized Finance (DeFi) emerged rapidly in recent years and provided open and transparent financial services to the public. Due to its popularity, it is not uncommon to see cybersecurity incidents in the DeFi landscape, yet the impact of such incidents is under-studied. In this paper, we examine two incidents in DeFi protocol that are mainly caused by misgovernance and mistake in the smart contract. By using the synthetic control method, we found that the incident in Alchemix did not have a significant effect on the total value locked (TVL) in the protocol, whereas the incident in Compound caused a 6.13% decrease in TVL. One factor that contributed to the difference in the result could be the incident response in social media platforms, and further study should investigate the possible moderating or mediating effects of public opinions and sentiment.

AB - Decentralized Finance (DeFi) emerged rapidly in recent years and provided open and transparent financial services to the public. Due to its popularity, it is not uncommon to see cybersecurity incidents in the DeFi landscape, yet the impact of such incidents is under-studied. In this paper, we examine two incidents in DeFi protocol that are mainly caused by misgovernance and mistake in the smart contract. By using the synthetic control method, we found that the incident in Alchemix did not have a significant effect on the total value locked (TVL) in the protocol, whereas the incident in Compound caused a 6.13% decrease in TVL. One factor that contributed to the difference in the result could be the incident response in social media platforms, and further study should investigate the possible moderating or mediating effects of public opinions and sentiment.

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M3 - Conference Paper published in a book

AN - SCOPUS:85192557443

T3 - International Conference on Information Systems, ICIS 2022: "Digitization for the Next Generation"

BT - International Conference on Information Systems, ICIS 2022

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Bank Error in Whose Favor? A Case Study of Decentralized Finance Misgovernance

Abstract

Publication series

Conference

Bibliographical note

Keywords

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Cite this