The role of disclosure in DeFi markets: Evidence from Twitter

• Main Author: AW YONG, Amanda
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: decentralized finance (defi); cryptocurrency; disclosure; information processing costs; Accounting; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/etd_coll/488; https://ink.library.smu.edu.sg/context/etd_coll/article/1486/viewcontent/GPAC_AY2022_PhD_Amanda_Aw_Yong_Zhi_Xin.pdf
• Institution: Singapore Management University

Decentralized Finance (DeFi) platforms use self-executing smart contracts to provide financial services and are programmed to automatically post all transactions on the public blockchain. Notwithstanding this public availability of blockchain information, DeFi platforms also aggregate these transactions and disclose the summarized blockchain information on their Twitter accounts. This paper studies whether and how voluntary disclosure of blockchain information plays a role in the transparent DeFi market. I find that the number of blockchain-related tweets is associated both with an increase in the platform’s Total Value Locked (TVL) and with an increase in the unique number of platform users. The relationship between blockchain-related tweets and TVL is strengthened when the tweets have greater information content and when users face higher information processing costs. This suggests that public blockchain transactions are too costly for users to process such that they rely on the platform’s disclosure. Overall, my results show that DeFi platforms can help users process and understand blockchain transactions by summarizing and disclosing them on Twitter.