Blockchain Papers

David Krause

No abstract is available for this record.

Romain Rossello

No abstract is available for this record.

Wei Jiang, Tao Li

Corporate governance encompasses a set of processes, customs, policies, laws, and institutions that affect how a corporation is directed, administered, or controlled. Technology both enhances and disrupts the traditional board-centric corporate governance system, enhancing efficiency and transparency while introducing new challenges and risks. In this work we examine three key themes comprehensively: the redefinition of information and information asymmetry through the generation of and access to big data; blockchain technology’s transformative potential for aggregating preferences and exercising shareholder voting rights while blurring the line between securities and tokens; and the impact of smart contracts and their underlying infrastructure on the expansion of contracts and the implementation of decentralized governance through decentralized autonomous organizations. These innovative technological solutions empower stakeholders to exercise governance rights effectively, but their complexity also gives rise to new barriers and inequalities. As technology evolves, collaboration among researchers, policymakers, and practitioners is imperative to ensure that corporate governance remains effective and responsive to the current dynamic business environment.

Jan Pevzner

This article introduces the LP forward contract, a derivative replicating the payoff of a liquidity position (LP) at a future date without intermediate yield. It provides tools for mitigating directional risks and managing impermanent loss. The framework applies the Black-Scholes model to the crypto space, offering closed-form solutions for LP forwards and dynamic hedging strategies. It breaks down HODL portfolios into impermanent loss-hedging portfolios and LP forward contracts, quantifying yield farming costs and enhancing risk management for liquidity providers. This approach aligns the interests of Web3 projects and investors, promoting sustainable growth in DeFi.

Danling Jiang, Lin Sun, Lolita Nazarov, Jiarong Chen · 6 authors

No abstract is available for this record.

Valerio Lo Monaco, Paul P. Momtaz, Silvio Vismara

• We study governance mechanisms in decentralized autonomous organizations (DAOs). • Regression discontinuity design on contested proposals overcomes endogeneity concerns. • Distributed governance mechanisms increase tokenholders value. • Proposal passage increases DAO token returns by 4.7 % at the margin. • Effect amplified by voter participation, DAO democratization, and DAO decentralization. Distributed governance mechanisms increase tokenholders value in decentralized autonomous organizations (DAOs) when decision-making is contested. Using a comprehensive dataset of proposals voted on within blockchain-based DAOs from 2020 to 2024, we exploit a regression discontinuity design on proposals that pass or fail by a close margin around the majority threshold. Local average treatment effects indicate that proposal passage increases DAO token returns by 4.7 % at the margin. Further, a one standard deviation increase in vote participation amplifies this effect by 2.2 %. Proxies for democratization and decentralization also increase the value-creating effect of contested decision-making in DAOs. Our findings contribute to understanding how distributed governance structures create value in digital organizations.

Viktor Ström, Nima Sanandaji, Saeid Esmaeilzadeh, M Esmaeilzadeh

Purpose The purpose of this paper is to investigate the potential link between Sweden’s high reliance on equity capital financing among small and medium-sized enterprises (SMEs) and its recognition as the most innovative economy in Europe according to the European Innovation Scoreboard (EIS). This paper examines the idea that the high levels of trust within Swedish society can explain why private equity financing is more prevalent among Swedish SMEs. Design/methodology/approach To test these ideas, the authors use data from the Survey on Access to Finance for Enterprises to measure the private equity reliance of firms. The authors also use the EIS to measure the innovation capacity of nations and various aspects of SMEs’ innovation activities. Finally, societal levels of trust are measured through the World Value Survey. Findings First, the authors find that European countries with a higher proportion of SMEs relying on equity financing tend to be ranked as more innovative by the EIS. Second, the authors find that the correlation between a nation’s share of SMEs relying on equity financing and their level of innovation activities is marginally stronger for product innovations than for business process innovations. Third, the authors find that countries with higher levels of trust tend to have higher equity capital reliance among SMEs. Originality/value This study builds upon previous research on equity capital and SMEs’ innovation activity while introducing new insights into the relationship between societal trust and equity financing.

Matti Ylönen, Ringa Raudla, Milan Babić

The global backlash against tax havens has pushed secrecy-seeking capital to explore alternative opportunities in non-tax-haven countries and new financial technologies (FinTech). We identify two major corporate practices—organizational ring-fencing and swarming—that have enabled secrecy-seeking capital to adapt to new regulatory realities and illustrate these practices empirically with the extreme case of Estonia. In the 2010s, several Nordic banks turned their Estonian offices into hotbeds of high-risk transactions, ring-fencing their Baltic affiliates from their group-level systems and generating several money laundering scandals with global repercussions. More recently, secrecy-seeking capital ‘swarmed’ into Estonia’s large cryptocurrency sector and thereby thwarted effective supervision of the activities of the firms involved. Neither swarming nor organizational ring-fencing have been sufficiently explained by existing approaches in International Political Economy (IPE) as new core practices of secrecy-seeking capital. We study both practices in a mixed-methods research design and provide novel empirical insights to illuminate this phenomenon. In filling this gap, our study paves the way for a second generation of global tax governance scholarship amidst the cryptocurrency and FinTech boom, and calls for a research agenda that addresses these new practices that take advantage of the lack of administrative capabilities in non-tax-haven jurisdictions.

Lai Gan

As an important part of the reform process of state-owned enterprises in recent years, government decentralization has a profound impact on the business activities of state-owned enterprises. The cash holding level of state-owned enterprises is not only related to the liquidity of state-owned enterprises, but also affects the effective value of state-owned enterprises in the product market competition. Taking the A-share state-owned listed companies in Shanghai and Shenzhen stock exchanges from 2001 to 2019 as samples, the OLS model is used to empirically test the impact of the government's willingness to delegate power on the cash holding level of state-owned enterprises. The research finds that the government decentralization has a significant negative relationship with the cash holding level of state-owned enterprises. Secondly, with the help of the intermediary effect model, the study finds that the government decentralization is to relieve the financing constraints of enterprises, reduce the policy burden of state-owned enterprises, and then reduce the cash holdings of enterprises. The research conclusion not only expands the relevant literature research on the impact of government decentralization on the cash holding level of state-owned enterprises, but also provides some reference for state-owned enterprises on how to improve their governance structure and capital management system.

Pascal Frank

No abstract is available for this record.

Wenxiao Yang, Zijun Shi, Song Lin

No abstract is available for this record.

Yuliya Guseva

Non-fungible tokens (NFTs) are used in numerous markets for collectibles, art, securities, and commodities. These are different markets, and there is no regulatory framework for all NFTs. To determine a proper legal regime, it is essential to locate the market to which an NFT belongs. This task requires a deep understanding of the economic realities of the associated rights, assets, and transactions. Economic-reality-based interpretations should provide a solid footing for better regulation of NFTs in the US and other jurisdictions grappling with NFT regulation. The new cryptoasset regime in the EU already incorporates a “substance over form” approach. In the US, courts have been successfully applying the Howey test to examine transactions and schemes and establish whether securities law should apply to cryptoassets. In 2023, the SEC and a US federal district court applied the Howey test to demonstrate why and how securities law built for legacy markets where mainstream assets are fungible could apply to transactions in non-fungible assets. The decisions are an example of establishing economic realities of transactions with novel assets regardless of the underlying technologies on which the assets are built. An economic reality approach should help courts and other policy-makers ascertain to which market an NFT belongs and which corresponding legal regime should govern.

Nir Chemaya, Dingyue Liu, Rob McLaughlin, Nicola Ruaro · 6 authors

No abstract is available for this record.

Sebeom Oh

A nearly real-time, immutable blockchain audit trail is widely thought to deter market abuse, yet systematic evidence is scarce. Analyzing 7.4 million transactions from 561 NFT collections, which represent unique digital assets on public blockchains, I show that wash trading activity has a negligible impact on market outcomes. Rather than boosting the value of their own NFT collections, wash traders appear motivated by token reward programs offered by trading platforms. In contrast, purchases by apparent insiders predict positive returns for the associated collections. Transparent ledgers thus both neutralize obvious trade-based manipulation and give market participants enough information to detect insider activity.

Imran Yousaf, Afsheen Abrar, Larisa Yarovaya

No abstract is available for this record.

Dong Huang, William N. Goetzmann

Using transaction data from a large non-fungible token (NFT) trading platform, this paper examines how the behavioral bias of selection-neglect interacts with extrapolative beliefs, accelerating the boom and delaying the crash in the recent NFT bubble.We show that the pricevolume relationship is consistent with extrapolative beliefs about increasing prices which were plausibly triggered by a macroeconomic shock.We test the hypothesis that agents prone to selection-neglect formed even more optimistic beliefs and traded more aggressively than their counterparts during the boom.When liquidity for NFTs declined, observed NFT prices were subject to severe selection bias due in part to seller loss aversion delaying the onset of the crash.Finally, we show that market participants with sophisticated bidding behavior were less subject to selection bias and performed better.

Lioba Heimbach, Eric Schertenleib, Roger Wattenhofer

Lending protocols in decentralized finance enable the permissionless exchange of capital from lenders to borrowers without relying on a trusted third party for clearing or market-making. Interest rates are purely set by the supply and demand of capital according to a pre-defined function. In the lead-up to The Merge: Ethereum blockchain's transition from proof-of-work (PoW) to proof-of-stake (PoS), a fraction of the Ethereum ecosystem announced plans of continuing with a PoW-chain. Owners of ETH - whether their ETH was borrowed or not - would hold the native tokens on each chain. This development alarmed lending protocols. They feared spiking ETH borrowing rates would lead to mass liquidations which could undermine their viability. Thus, the decentralized autonomous organization running the protocols saw no alternative to intervention - restricting users' ability to borrow. We investigate the effects of the merge and the aforementioned intervention on the two biggest lending protocols on Ethereum: AAVE and Compound. Our analysis finds that borrowing rates were extremely volatile, jumping by two orders of magnitude, and borrowing at times reached 100% of the available funds. Despite this, no spike in mass liquidations or irretrievable loans materialized. Further, we are the first to quantify and analyze hard-fork-arbitrage, profiting from holding debt in the native blockchain token during a hard fork. We find that arbitrageurs made in excess of 13 Mio US$, money that was effectively extracted from the platforms' lenders. Finally, we identify alarming security risks to the entire Ethereum ecosystem. Around one-fifth of the staked ETH through LIDO (stETH) was locked as collateral on lending protocols. Mass liquidations caused by spiking rates would have devastating effects on the stETH price and pose security concerns for the consensus layer, as staking power could be bought at a significant discount.

Ioannis Filippos Kanellopoulos, Dominik Gutt, Murat Tunç, Ting Li

No abstract is available for this record.

Siddharth M. Bhambhwani

The decentralized finance (DeFi) industry hosts billions of dollars in cryptocurrency deposits across protocols that autonomously and independently execute financial transactions. However, little is known about how these protocols raise capital or conduct their governance. This paper examines the token distribution mechanisms of the top-50 DeFi protocols and documents significant variation in how tokens are allocated to users, investors, and developers. We find that several protocols distribute a greater share of tokens to insiders, such as through private sales and developer allocations, rather than to users via incentives and airdrops. We present evidence that protocols with greater insider control exhibit fewer deposits, lower token values, and increased risk. Using an event-study analysis, we find significant increases in protocol deposits post-airdrops. Our results suggest that DeFi users prefer user-centric governance models and are sensitive to the risks of insider control. Lastly, this paper discusses the risks and challenges of DeFi governance.

Sylvain Carré, Franck Gabriel

We construct a tractable general equilibrium model of DeFi lending to shed light on the role of pricing rules. We determine how the rule controls key equilibrium variables such as the utilization rate. Our model delivers a measure of welfare which incorporates the DeFi borrowing rate and the security of the underlying (Proof-of-Stake) blockchain, which we use to find welfare-maximizing pricing rules. Using a genuine function of the utilization rate becomes meaningful when there is parameter uncertainty. We establish conditions under which the first-best can be implemented by such a function, which we exhibit explicitly. When these conditions are not met, allowing the rule to also depend on the staking level restores efficiency. Our analysis leads to several other practical recommendations and conceptual clarifications.

Guangqian Ren, Yifan Mo, Li Liu, Minna Zheng · 5 authors

The innovation efficiency of an enterprise is subject to the behavior of the innovation subject, while the equity pledge behavior of the controlling shareholder not only brings convenience for innovation investment and financing, but also brings risks which has an impact on the innovation output of the enterprise. In this paper, we investigate how equity pledge of controlling shareholders affect the enterprise innovation efficiency using the data of China’s A-share listed companies from 2014 to 2020, and examine the effect of property right structure on the relationship between them from the two dimensions of equity nature and equity concentration. We find that equity pledge of controlling shareholders are signifcantly negatively related to innovation efficiency, meaning that equity pledge inhibits the innovation behavior of enterprises and reduces the innovation efficiency. We further provide evidence to show that the impediment effect of equity pledge of controlling shareholder on enterprise innovation efficiency is more pronounced in non-state-owned enterprises and decentralized equity enterprises. Moreover, our analysis shows that different equity concentration levels have different effects in the process of equity pledge affecting enterprise innovation efficiency and the effect of concentrated equity enterprises is lower than that of decentralized enterprises.

Minjae Kim, Eva Liang, Xinyuan Shao

No abstract is available for this record.

Eleanore Hickman, Eilís Ferran

No abstract is available for this record.

Xing Bao, Prakash Mirchandani, Jennifer Shang

No abstract is available for this record.