Bank of Canada report confirms the technical feasibility of Aave's non-custodial lending system

Foresight News reports that the Bank of Canada has released a report titled "DeFi Lending: Yields, Leverage, and Liquidation Risk," stating that it studied decentralized lending on Aave V3. The report uses transaction-level data to analyze its yield model, borrower behavior, and liquidation dynamics, and finds that protocol yields are concentrated in a few tokens. Many users, despite over-collateralization requirements, still engage in recursive leverage operations, and liquidations occur in concentrated waves, but have limited impact on the broader market. Overall, with proper governance, DeFi lending is operationally viable, but it also faces constraints related to capital efficiency, liquidation risk, and systemic vulnerabilities within the crypto ecosystem.