Formal Analysis of Lending Pools in Decentralized Finance

Massimo Bartoletti; James Chiang; Tommi Junttila; Alberto Lluch Lafuente; Massimiliano Mirelli; Andrea Vandin

doi:10.1007/978-3-031-19759-8_21

Formal Analysis of Lending Pools in Decentralized Finance

Massimo Bartoletti, James Chiang, Tommi Junttila, Alberto Lluch Lafuente^*, Massimiliano Mirelli, Andrea Vandin

^*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceeding › Conference article in proceedings › Scientific › peer-review

6 Citations (Scopus)

Abstract

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 the most widespread DeFi applications: Lending Pools (LP). This was achieved by leveraging an existing formal model for LPs, the Maude verification environment and the MultiVeStA statistical analyser. The tool supports several analyses including reachability analysis, LTL model checking and statistical model checking. In this paper we show how the tool can be used to analyse several parameters of LPs that are fundamental to assess and predict their behaviour. In particular, we use statistical analysis to search for threshold and reward parameters that minimize the risk of unrecoverable loans.

Original language	English
Title of host publication	Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings
Editors	Tiziana Margaria, Bernhard Steffen
Publisher	Springer
Pages	335-355
Number of pages	21
ISBN (Print)	978-3-031-19758-1
DOIs	https://doi.org/10.1007/978-3-031-19759-8_21
Publication status	Published - 2022
MoE publication type	A4 Conference publication
Event	International Symposium on Leveraging Applications of Formal Methods, Verification and Validation - Rhodes, Greece Duration: 22 Oct 2022 → 30 Oct 2022 Conference number: 11

Publication series

Name	Lecture Notes in Computer Science
Publisher	Springer
Volume	13703 LNCS
ISSN (Print)	0302-9743
ISSN (Electronic)	1611-3349

Conference

Conference	International Symposium on Leveraging Applications of Formal Methods, Verification and Validation
Abbreviated title	ISoLA
Country/Territory	Greece
City	Rhodes
Period	22/10/2022 → 30/10/2022

Access to Document

10.1007/978-3-031-19759-8_21

https://arxiv.org/abs/2206.01333

Cite this

Bartoletti, M., Chiang, J., Junttila, T., Lluch Lafuente, A., Mirelli, M., & Vandin, A. (2022). Formal Analysis of Lending Pools in Decentralized Finance. In T. Margaria, & B. Steffen (Eds.), Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings (pp. 335-355). (Lecture Notes in Computer Science ; Vol. 13703 LNCS). Springer. https://doi.org/10.1007/978-3-031-19759-8_21

Bartoletti, Massimo ; Chiang, James ; Junttila, Tommi et al. / Formal Analysis of Lending Pools in Decentralized Finance. Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings. editor / Tiziana Margaria ; Bernhard Steffen. Springer, 2022. pp. 335-355 (Lecture Notes in Computer Science ).

@inproceedings{5ce8f50c1e684e6ca0b44d9eef49c13d,

title = "Formal Analysis of Lending Pools in Decentralized Finance",

abstract = "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 the most widespread DeFi applications: Lending Pools (LP). This was achieved by leveraging an existing formal model for LPs, the Maude verification environment and the MultiVeStA statistical analyser. The tool supports several analyses including reachability analysis, LTL model checking and statistical model checking. In this paper we show how the tool can be used to analyse several parameters of LPs that are fundamental to assess and predict their behaviour. In particular, we use statistical analysis to search for threshold and reward parameters that minimize the risk of unrecoverable loans.",

author = "Massimo Bartoletti and James Chiang and Tommi Junttila and {Lluch Lafuente}, Alberto and Massimiliano Mirelli and Andrea Vandin",

note = "Publisher Copyright: {\textcopyright} 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.; International Symposium on Leveraging Applications of Formal Methods, Verification and Validation, ISoLA ; Conference date: 22-10-2022 Through 30-10-2022",

year = "2022",

doi = "10.1007/978-3-031-19759-8_21",

language = "English",

isbn = "978-3-031-19758-1",

series = "Lecture Notes in Computer Science ",

publisher = "Springer",

pages = "335--355",

editor = "Tiziana Margaria and Bernhard Steffen",

booktitle = "Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings",

address = "Germany",

}

Bartoletti, M, Chiang, J, Junttila, T, Lluch Lafuente, A, Mirelli, M & Vandin, A 2022, Formal Analysis of Lending Pools in Decentralized Finance. in T Margaria & B Steffen (eds), Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings. Lecture Notes in Computer Science , vol. 13703 LNCS, Springer, pp. 335-355, International Symposium on Leveraging Applications of Formal Methods, Verification and Validation, Rhodes, Greece, 22/10/2022. https://doi.org/10.1007/978-3-031-19759-8_21

Formal Analysis of Lending Pools in Decentralized Finance. / Bartoletti, Massimo; Chiang, James; Junttila, Tommi et al.
Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings. ed. / Tiziana Margaria; Bernhard Steffen. Springer, 2022. p. 335-355 (Lecture Notes in Computer Science ; Vol. 13703 LNCS).

Research output: Chapter in Book/Report/Conference proceeding › Conference article in proceedings › Scientific › peer-review

TY - GEN

T1 - Formal Analysis of Lending Pools in Decentralized Finance

AU - Bartoletti, Massimo

AU - Chiang, James

AU - Junttila, Tommi

AU - Lluch Lafuente, Alberto

AU - Mirelli, Massimiliano

AU - Vandin, Andrea

N1 - Conference code: 11

PY - 2022

Y1 - 2022

N2 - 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 the most widespread DeFi applications: Lending Pools (LP). This was achieved by leveraging an existing formal model for LPs, the Maude verification environment and the MultiVeStA statistical analyser. The tool supports several analyses including reachability analysis, LTL model checking and statistical model checking. In this paper we show how the tool can be used to analyse several parameters of LPs that are fundamental to assess and predict their behaviour. In particular, we use statistical analysis to search for threshold and reward parameters that minimize the risk of unrecoverable loans.

AB - 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 the most widespread DeFi applications: Lending Pools (LP). This was achieved by leveraging an existing formal model for LPs, the Maude verification environment and the MultiVeStA statistical analyser. The tool supports several analyses including reachability analysis, LTL model checking and statistical model checking. In this paper we show how the tool can be used to analyse several parameters of LPs that are fundamental to assess and predict their behaviour. In particular, we use statistical analysis to search for threshold and reward parameters that minimize the risk of unrecoverable loans.

UR - http://www.scopus.com/inward/record.url?scp=85142761249&partnerID=8YFLogxK

U2 - 10.1007/978-3-031-19759-8_21

DO - 10.1007/978-3-031-19759-8_21

M3 - Conference article in proceedings

AN - SCOPUS:85142761249

SN - 978-3-031-19758-1

T3 - Lecture Notes in Computer Science

SP - 335

EP - 355

BT - Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings

A2 - Margaria, Tiziana

A2 - Steffen, Bernhard

PB - Springer

T2 - International Symposium on Leveraging Applications of Formal Methods, Verification and Validation

Y2 - 22 October 2022 through 30 October 2022

ER -

Bartoletti M, Chiang J, Junttila T, Lluch Lafuente A, Mirelli M, Vandin A. Formal Analysis of Lending Pools in Decentralized Finance. In Margaria T, Steffen B, editors, Leveraging Applications of Formal Methods, Verification and Validation. Adaptation and Learning - 11th International Symposium, ISoLA 2022, Proceedings. Springer. 2022. p. 335-355. (Lecture Notes in Computer Science ). doi: 10.1007/978-3-031-19759-8_21