Proof-of-Stake (PoS) validators hold the blockchain's native asset, generating a direct financial incentive to settle transactions quickly: delays reduce the value of their own stake. This paper is the first to formalize that economic channel, demonstrating that the incentive is stronger when validators are required to hold more stake. The findings imply that a minimum stake requirement, such as Ethereum's 32 ETH threshold, strengthens validator incentives. The paper also establishes that double-spending attacks on PoS are not profitable when the native asset's market capital is sufficiently large, because acquiring a controlling stake becomes prohibitively expensive.

A common criticism of PoS is that it creates a "rich get richer" dynamic because larger stakers are more likely to earn rewards. This paper shows the criticism is wrong when all investors stake equally. Staking rewards are newly minted tokens that dilute all holders. A larger staker is selected more often, but each reward dilutes everyone's share equally. These effects exactly offset: wealth shares are expected to remain stable over time.

Bitcoin's transaction processing rate is low, causing elongated settlement times for users. This paper shows that Bitcoin cannot simply increase its processing rate to solve the problem. Faster processing increases the chance that multiple miners independently produce conflicting blocks before hearing about each other's work. These conflicts (forks) must be resolved before any transaction is considered settled, creating additional delays. The paper formalizes this as a fundamental dilemma for Layer-1 blockchain scaling, one that motivates the development of Layer-2 blockchains.

This paper provides a comprehensive overview of the research literature studying economic questions associated with blockchain technology. The paper organizes the field into two areas: the study of blockchain settlement protocols and the study of applications deployed on blockchains. The first part examines whether and when consensus protocols generate settlement and what determines their security. The second part examines applications such as decentralized exchanges and lending protocols, and the economic value they create.

This paper formally demonstrates that Proof-of-Stake (PoS) blockchains are more secure than comparable Proof-of-Work (PoW) blockchains. Validation investment under both protocols is determined by the opportunity cost of capital. Under PoS, that opportunity cost is the return validators could earn from alternative investments. Under PoW, miners face the same opportunity cost plus dead-weight costs from hardware depreciation and energy consumption. These additional costs reduce PoW miners' net returns, leading to lower total validation investment. Since attacking a blockchain requires resources proportional to total validation investment (e.g., a majority attack), lower investment implies lower security. Thus, PoW's well-known environmental costs are not just an environmental problem but an economic problem with direct security consequences.

This paper demonstrates that a sufficiently productive blockchain can be secured against arbitrarily large attacks. The key mechanism is price impact, a well-established phenomenon in financial markets that the prior blockchain literature has overlooked. Attacking a PoS blockchain requires purchasing a controlling stake of the blockchain's native asset, and acquiring such a large quantity from a limited circulating supply generates significant price impact. Crucially, staking is endogenous and reduces circulating supply, amplifying the price impact and thereby the cost of attack. The protocol can incentivize more staking through inflation, but inflation is costly to users because it dilutes their holdings. The binding constraint is therefore productivity: when a blockchain generates enough economic value that users maintain sufficient demand despite inflation, the protocol can push staking high enough that attacks become prohibitively expensive at any scale.

Layer-2 blockchains (L2s) solve the scaling problem by offering higher throughput at lower fees, but their success creates a new tension. This paper shows that as L2s mature and their risk premium declines, liquidity and trading activity migrate from L1 to L2. This migration threatens L1 viability: under PoS, L1 security depends on the market value of the L1 native asset, which in turn depends on L1 activity. If the L1 cannot sustain meaningful activity alongside L2, the security of the entire ecosystem is compromised. The paper shows that reducing L1 fees can slow this migration by keeping L1 competitive for traders.

This paper establishes that DEX liquidity providers bear real costs even without adverse selection (e.g., impermanent loss). Providing liquidity is an investment, and investors therefore forgo returns they could earn elsewhere. The paper shows that trading fees must compensate this opportunity cost for any economic activity to arise at a DEX. Trading fees also discourage trading, however, and this tension produces a counterintuitive result: raising fees can increase trading volume. In more detail, higher fees attract more liquidity investment, increasing inventory and reducing price impact for traders. When the reduction in price impact outweighs the fee increase, total trading costs fall and volume rises. This effect reverses at high fee levels, so that both liquidity provision and trading volume are non-monotone in the fee level.

Concentrated liquidity is the dominant DEX design, introduced in Uniswap v3 and used in Uniswap v4, yet no prior work had derived its equilibrium. This paper does so by recognizing that DEX liquidity provision is an investment, and equilibrium is therefore determined by a no-arbitrage condition: the risk-adjusted return from providing liquidity to any price interval must equal the risk-free rate. Crucially, this condition requires no explicit assumptions regarding investor risk preferences and is separable across intervals, meaning equilibrium liquidity at any price level can be determined independently of every other price level. Building on this foundation, the paper shows that the payoff from providing concentrated liquidity is approximated by a covered call, where the cost to the liquidity provider is the forfeited time premium of the embedded option.

DEXs are immutable code deployed on permissionless blockchains, not centralized enterprises, and this paper examines why they cannot be regulated as traditional exchanges. The assumptions underlying exchange regulation, that a responsible entity exists and can be compelled to comply, do not apply. The paper further shows that regulating supporting entities (e.g., Uniswap Labs) can backfire: onerous requirements may cause these entities to cease operations, while the DEX code continues to function without them, leaving users exposed to the same risks with less mitigation. The paper also discusses investor protection risks (e.g., sandwich attacks, adverse selection losses) and documents how industry-developed solutions are already addressing many of these risks.

Decentralized lending protocols (e.g., Aave, Compound) set interest rates via a fixed formula encoded in a smart contract, with no discretion and no intermediary. Despite this mechanical process, this paper shows that a unique stable equilibrium always exists. Steepening the interest rate function can improve efficiency, a direction practice is already moving (e.g., Morpho). The paper shows, however, that steepening faces a fundamental limit: steeper curves make interest rates more sensitive to economic fluctuations, and users who face uncertainty about future conditions pull back when rates may swing against them.

This paper shows that tokenization may not be adopted even when it is socially beneficial. When the entities bearing the cost of adoption operate in a competitive sector, competition erodes the revenue gains from adoption, rendering it unprofitable for those entities to adopt. The result establishes a general principle: the value created by tokenization does not guarantee its adoption. Whether adoption arises depends on whether the entity bearing the costs can capture the gains.

Market power can enable blockchain adoption. When the adopting entity has market power, it can raise prices to capture some of the value that tokenization creates for its customers. This makes adoption profitable for the entity bearing the costs, provided those costs are sufficiently low. The broader implication is that market structure determines whether welfare-improving tokenization is adopted in practice.