Follow blockchain research across journals, conferences, and preprint repositories.
720 results · page 13 of 30
Tom Taulli
Since childhood, Gavin Wood has been interested in the convergence of economics and game theory. He even co-published a board game of strategy. He was also an avid computer programmer, having started at age eight.
Alfred Lehar, Christine A. Parlour
No abstract is available for this record.
Ben Charoenwong, Robert M. Kirby, Jonathan Reiter
Decentralized Finance (DeFi) aims to use advancements in both computation and cryptography to tackle standard economic problems. It must, therefore, operate within the intersection of constraints required by both the computer science and economic domains. We explore a foundational question at the junction of those fields: is it possible to synthesize variable market-clearing risk-free yield for native tokens via smart contracts? We show using a stylized model representing a large class of existing decentralized consensus algorithms that this is not possible. This places strong bounds on what decentralized financial products can be built and constrains the shape of future developments in DeFi. Among other limitations, our results reveal that markets in DeFi are incomplete.
Hugo Benedetti, Sebastián Labbé
No abstract is available for this record.
Axel Wieandt, Laurenz Heppding
The financial crisis of 2007-08 revealed that centralized finance (CeFi) relying on large, interconnected financial institutions is easily destabilized. Since the crisis, significant regulatory tightening, monetary easing, and new competitors (e.g., fintechs) have created significant pressure on profit margins and CeFi business models. Recently, a new form of financial intermediation that functions independently of centralized intermediaries has emerged, namely decentralized finance (DeFi). DeFi relies on public, permissionless blockchains and uses so-called smart contracts to perform financial services such as borrowing, lending, and trading in a transparent and automated fashion. The paper gives an overview of DeFi and discusses its advantages and disadvantages compared to CeFi. We analyze different scenarios about the future paths of CeFi and DeFi, concluding that a convergence scenario is most likely.
Paul P. Momtaz
No abstract is available for this record.
R. Velmurugan, J. Sudarvel, Ravi Thirumalaisamy
Cryptocurrencies and decentralized finance (DeFi) are reshaping how value is created, exchanged, and governed, and this chapter positions them as more than speculative instruments by reading them as an emerging financial infrastructure. In an ideal digital economy, programmable money supports low-friction transactions, broad participation, and transparent rules, while users retain control without surrendering trust to dominant intermediaries. Yet that ideal remains unevenly realized: markets still absorb extreme volatility, smart contracts still fail under adversarial conditions, and regulatory responses still oscillate between accommodation and restriction, leaving innovation and consumer protection in tension. Prior scholarship has mapped the monetary properties of Bitcoin as a scarcity-driven “digital store of value,” and it has framed Ethereum as the computational base layer that makes smart contracts—and therefore DeFi—possible. Studies on decentralized exchanges, lending protocols, automated market makers, and liquidity incentives have shown how 328 intermediated functions can be replicated through code, but they have also documented exploit patterns, oracle manipulation, governance capture, and composability risks that propagate across protocols. What remains underdeveloped is an integrated account that connects asset design, protocol architecture, and institutional constraints into a single explanatory model. To address this gap, the study advances a sociotechnical framework that links blockchain trust primitives with financial intermediation theory. By tracing how cryptocurrencies supply liquidity and collateral to DeFi, while DeFi amplifies token utility and systemic exposure, the chapter clarifies the conditions under which decentralized finance can mature into a resilient, inclusive financial ecosystem.
Fernando Álvarez, David Argente, Diana Van Patten
A currency's essential feature is to be a medium of exchange. We leverage a quasi-natural experiment-El Salvador as the rst country to make bitcoin legal tender-to study a cryptocurrency's potential to be used in daily transactions. The government also launched and provided incentives to download and use a digital wallet named Chivo, which shares features with Central Bank Digital Currencies (CBDCs) and allows users to trade bitcoin and dollars. Were Chivo Wallet and bitcoin actually adopted after this "big push"? Conducting a representative face-to-face survey and relying on blockchain data to obtain all Chivo transactions, we document how usage of digital payments and bitcoin is low, concentrated, and has been decreasing over time. We nd that privacy concerns are key barriers to adoption, which speaks to a policy debate on crypto and CBDCs that has had anonymity at its core. We also estimate the technology's adoption cost and its network externalities.
Ashish Rajendra Sai, Jim Buckley, Andrew Le Gear
Cryptocurrencies often tend to maintain a publically accessible ledger of all transactions. This open nature of the transactional ledger allows us to gain macroeconomic insight into the USD 1 Trillion crypto economy. In this paper, we explore the free market-based economy of eight major cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, Dash, Litecoin, ZCash, Dogecoin, and Ethereum Classic. We specifically focus on the aspect of wealth distribution within these cryptocurrencies as understanding wealth concentration allows us to highlight potential information security implications associated with wealth concentration. We also draw a parallel between the crypto economies and real-world economies. To adequately address these two points, we devise a generic econometric analysis schema for cryptocurrencies. Through this schema, we report on two primary econometric measures: Gini value and Nakamoto Index which report on wealth inequality and 51% wealth concentration respectively. Our analysis reports that, despite the heavy emphasis on decentralization in cryptocurrencies, the wealth distribution remains in-line with the real-world economies, with the exception of Dash. We also report that 3 of the observed cryptocurrencies (Dogecoin, ZCash, and Ethereum Classic) violate the honest majority assumption with less than 100 participants controlling over 51% wealth in the ecosystem, potentially indicating a security threat. This suggests that the free-market fundamentalism doctrine may be inadequate in countering wealth inequality within a crypto-economic context: Algorithmically driven free-market implementation of these cryptocurrencies may eventually lead to wealth inequality similar to those observed in real-world economies.
Mattia L. Rattaggi, Luca Schenk
Since the creation of Bitcoin in 2009, digital exchanges have demonstrated that global, 24/7 and disintermediated trading is possible. By trading digital currencies, they have grown to a size impossible to ignore. To allow digital exchanges to enter the multitrillion market of securities trading and business, technology and regulators need to work hand in hand. Together, they are in a position to solve the challenges of a steep learning curve and build an efficient, convenient and, most importantly, trustable environment that can protect investors. Regulators face the challenge of channelling the path but are potentially also among the biggest beneficiaries of the inevitable transition from traditional stock exchanges to digital asset exchanges, since compliance may be ensured by design. While ensuring personal data protection and jurisdiction particularities, global standardisation and distributed ledger technology (DLT) can effectively forestall trading errors and market abuse instead of leaving them to be discovered. To generate the necessary trust for market participants to adopt, digital exchanges will have to be regulated, licensed and supervised in the same way that traditional stock exchanges are today, while safeguarding and leveraging the technological benefits that DLT carry.
Henri T. Heinonen
Decentralized Finance (DeFi) is a popular topic in the blockchain and cryptocurrency industry in the early 2020s. Still, cryptocurrencies have not yet become Decentralized Payment Systems (DPS) because of the high volatility of bitcoin and many of the altcoins. We investigated a proposed method to form a non-collateralized stablecoin called the Morini's Scheme of Inv&Sav wallets. We figured out two equations for the rebasement for the Inv wallet balances and then compared the results. We found the second rebasement method to be fairer to the agents, but we found the issue of negative balances with both methods. We proposed novel solutions to overcome these issues. One of the proposed solutions was to freeze some money in the Sav wallet if there is a negative balance in the Inv wallet. Another proposed solution was to introduce a two-money economy of money and antimoney to turn the current centralized token distribution model decentralized and make transactions more probable even if agents do not have enough money funds; this could be seen as a decentralized version of credit cards.
Matheus R. Grasselli, Alexander Lipton
We review different classes of cryptocurrencies with emphasis on their economic properties. Pure-asset coins such as Bitcoin, Ethereum and Ripple are characterized by not being a liability of any economic agent and most resemble commodities such as gold. Central bank digital currencies, at the other end of the economic spectrum, are liabilities of a Central Bank and most resemble cash. In between, there exist a range of so-called stable coins, with varying degrees of economic complexity. We use balance sheet operations to highlight the properties of each class of cryptocurrency and their potential uses. In addition, we propose the basic structure for a macroeconomic model incorporating all the different types of cryptocurrencies under consideration.
Hamed Amini, Maxim Bichuch, Zachary Feinstein
In this paper, we construct a decentralized clearing mechanism which endogenously and automatically provides a claims resolution procedure. This mechanism can be used to clear a network of obligations through blockchain. In particular, we investigate default contagion in a network of smart contracts cleared through blockchain. In so doing, we provide an algorithm which constructs the blockchain so as to guarantee the payments can be verified and the miners earn a fee. We, additionally, consider the special case in which the blocks have unbounded capacity to provide a simple equilibrium clearing condition for the terminal net worths; existence and uniqueness are proven for this system. Finally, we consider the optimal bidding strategies for each firm in the network so that all firms are utility maximizers with respect to their terminal wealths. We first look for a mixed Nash equilibrium bidding strategies, and then also consider Pareto optimal bidding strategies. The implications of these strategies, and more broadly blockchain, on systemic risk are considered.
Lin William Cong, Danxia Xie, Longtian Zhang
We build an endogenous growth model with consumer-generated data as a new key factor for knowledge accumulation. Consumers balance between providing data for profit and potential privacy infringement. Intermediate good producers use data to innovate and contribute to the final good production, which fuels economic growth. Data are dynamically nonrival with flexible ownership while their production is endogenous and policy-dependent. Although a decentralized economy can grow at the same rate (but are at different levels) as the social optimum on the Balanced Growth Path, the R&D sector underemploys labor and overuses data—an inefficiency mitigated by subsidizing innovators instead of direct data regulation. As a data economy emerges and matures, consumers’ data provision endogenously declines after a transitional acceleration, allaying long-run privacy concerns but portending initial growth traps that call for interventions. This paper was accepted by Kay Giesecke, finance.
Philipp Saborosch, Dmitry Ushakov
No abstract is available for this record.
Rodney Garratt
No abstract is available for this record.
Tai‐Wei Hu
No abstract is available for this record.
Hakwan Lau, Stephen D. Tse
In this review, we evaluate the mechanisms behind the decentralized finance\nprotocols for generating stable, passive income. Currently, such savings\ninterest rates can be as high as 20% annually, payable in traditional currency\nvalues such as US dollars. Therefore, one can benefit from the growth of the\ncryptocurrency markets, with minimal exposure to their volatility risks. We aim\nto explain the rationale behind these savings products in simple terms. The key\nto this puzzle is that asset deposits in cryptocurrency ecosystems are of\nintrinsic economic value, as they facilitate network consensus mechanisms and\nautomated marketplaces (e.g. for lending). These functions create wealth for\nthe participants, and they provide unique advantages unavailable in traditional\nfinancial systems. Our review speaks to the notion of decentralized basic\nincome - analogous to universal basic income but guaranteed by financial\nproducts on blockchains instead of public policies. We will go through their\nimplementations of how savings can be channeled into the staking deposits in\nProof-of-Stake (PoS) protocols, through fixed-rate lending protocols and\nstaking derivative tokens, thereby exposing savers with minimal risks. We will\ndiscuss potential pitfalls, assess how these protocols may behave in market\ncycles, as well as suggest areas for further research and development.\n
Ali Raheman, Anton Kolonin, Ben Goertzel, Gergely Hegykozi · 5 authors
We present the cognitive architecture of an autonomous agent for active portfolio management in decentralized finance, involving activities such as asset selection, portfolio balancing, liquidity provision, and trading. Partial implementation of the architecture is provided and supplied with preliminary results and conclusions.
Alexander Lipton
New technologies unleash competitive threats to the incumbents by allowing new entrants to join the party and eventually reshape the entire financial ecosystem
Edoardo Beretta
The paper explores the role, evolution and ruling principles of the concept of “money” in the 21st Century. In this continuously evolving context, cryptocurrencies and Blockchain technology are widely considered the most relevant monetary innovations of the last decades. By means of a macro-founded logical-analytical approach combined with statistical evidence, the paper provides arguments: 1. dismissing the “innovation myth” behind cryptocurrencies because of de facto representing a comeback of the private issue of means of payments and, more problematically, seigniorage at its best; 2. confirming that crypto-tokens do not comply with basic, still ruling monetary principles; 3. suggesting that excess liquidity is already invested in crypto-markets (which are themselves “inflationary”, namely not backed by real value (i.e. GDP). The concrete risk is, once again in economic history, represented by facing a financial bubble.
Carlos Eduardo Carvalho, Desirée Almeida Pires, Marcel Artioli, Giuliano Contento de Oliveira
Abstract This paper analyses the impacts of the innovation known as distributed ledger technology (DLT) on the monetary system and on financial activities. Private cryptocurrencies, such as Bitcoin, are permissionless means of payment, based on blockchain, a form of DLT. Evaluations suggested that these private cryptocurrencies could compete with the banks payment systems and even supplant state currency. The development of these technologies has the potential to modify profoundly monetary and financial practices, but there are no indications that they may threaten the centrality of state money and the banking system in the contemporary monetary order. Major international banks have developed cryptocurrencies for settlement systems and for interbank transactions, including the so-called stablecoins, issued by highly technological companies with on par conversion into state money. Some central banks are studying the launch of state cryptocurrencies that could coexist with their fiduciary state currency and even replace their paper currency. The use of this technology results in new challenges for regulation, including the fact that cryptocurrencies can be used for money laundering and by organized crime.
Nassim Nicholas Taleb
This discussion applies quantitative finance methods and economic arguments to cryptocurrencies in general and bitcoin in particular -- as there are about $10,000$ cryptocurrencies, we focus (unless otherwise specified) on the most discussed crypto of those that claim to hew to the original protocol (Nakamoto 2009) and the one with, by far, the largest market capitalization. In its current version, in spite of the hype, bitcoin failed to satisfy the notion of "currency without government" (it proved to not even be a currency at all), can be neither a short nor long term store of value (its expected value is no higher than $0$), cannot operate as a reliable inflation hedge, and, worst of all, does not constitute, not even remotely, a safe haven for one's investments, a shield against government tyranny, or a tail protection vehicle for catastrophic episodes. Furthermore, bitcoin promoters appear to conflate the success of a payment mechanism (as a decentralized mode of exchange), which so far has failed, with the speculative variations in the price of a zero-sum maximally fragile asset with massive negative externalities. Going through monetary history, we show how a true numeraire must be one of minimum variance with respect to an arbitrary basket of goods and services, how gold and silver lost their inflation hedge status during the Hunt brothers squeeze in the late 1970s and what would be required from a true inflation hedged store of value.
Urban J. Jermann
No abstract is available for this record.