Interoperability Effects: Extending DeFi Lending Risk Models to Multi-Chain Environments

Abstract

On-chain lending has expanded across multiple distributed ledgers as DeFi becomes increasingly multi-chain. This environment introduces novel technical and financial mechanisms, particularly cross-blockchain communication and asset transfer protocols, yet cross-chain elements remain understudied in lending protocol risk management. To address this gap, we applied panel regression fixed effects and OLS models to empirically analyze the impact of cross-blockchain interoperability solutions, using TVL and total revenue as performance proxies from October 2022 to January 2025. Our data set covers 15 decentralized lending protocols and 53 cross-chain bridges across 9 EVM-compatible blockchains, categorized as Ethereum, alternative layer-1s, and Ethereum layer-2 networks. The results reveal that cross-chain activity impacts on protocol performance. Bridge volume emerges as a significant explanatory variable. It shows a significant association with TVL and revenue across different categories, though the direction of this effect varies heterogeneously. Increased bridge integrations are generally associated with decreased TVL and protocol revenue across categories, potentially indicating liquidity escapes from these lending ecosystems. Liquidations produce heterogeneous effects across categories. The panel data reveal that new network launches are weakly associated with TVL and revenue, while bridge hacks show no significant relationship. The R-squared values confirm meaningful explanatory power. We further show that Ethereum attracts large depositors, while layer-2s skew toward retail participation. We conclude that effective DeFi risk models should incorporate cross-chain metrics and adopt a layer-aware approach to accurately reflect the evolving multi-chain landscape.

Accepted as a full paper for IEEE BCCA2026