Mega-whale driven decentralized lending protocols

Abstract This study examines systemic risks in decentralized lending protocols stemming from “mega-whales”—large users with transaction volumes exceeding $100 million—who dominate liquidity dynamics. Using high-frequency transaction-level data from major protocols ( Aave v2/v3 , Compound v2/v3 , Morpho Blue , Flux , and SparkLend ) spanning August 2024 to August 2025, we identify 550 mega-whales and analyze their impacts across market size, structural risks, and user activity. Key findings reveal the following: (1) The net growth in both mega-whale deposits and borrowing is negatively correlated with the market-size dynamics of lending protocols, while arbitrage-driven behaviors (such as token diversification and platform switching) further fragment the growth of Total Value Locked (TVL); (2) Although whale borrowing serves to temporarily stabilize leverage ratios, deposit activities may adversely impact systemic stability; however, an increase in mega-whale deposits is found to positively stimulate the growth and participation of unique depositors; (3) Utilizing event-window controls around DeFi shocks, we confirm that these effects are strongly associated with mega-whale activities rather than market-wide events. These results point to participation patterns that may be inconsistent with DeFi’s egalitarian ethos, suggesting that economic concentration could influence market dynamics.