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Distributed Ledgers and the Governance of Money

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Abstract

Blockchain technology breathes new life into the classical analysis of money as a substitute for a ledger of all past transactions. While it involves updating the ledger through a decentralized consensus on the unique truth, the robustness of the equilibrium that supports this consensus depends on who has access to the ledger and how it can be updated. Using a global game analysis of an exchange economy with credit, we solve for the optimal ledger design that balances security, scalability and decentralization. When intertemporal incentives are strong, a centralized ledger is always optimal. Otherwise, decentralization may be optimal.

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  • Raphael Auer & Cyril Monnet & Hyun Song Shin, 2021. "Distributed Ledgers and the Governance of Money," Working Papers 21.01, Swiss National Bank, Study Center Gerzensee.
    • Handle: RePEc:szg:worpap:2101
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    Cited by:

    1. Raphael Auer & Rainer Boehme, 2021. "Central bank digital currency: the quest for minimally invasive technology," BIS Working Papers 948, Bank for International Settlements.
    2. Joseph Abadi & Markus Brunnermeier, 2018. "Blockchain Economics," NBER Working Papers 25407, National Bureau of Economic Research, Inc.
    3. Kee-Youn Kang, 2023. "Cryptocurrency and double spending history: transactions with zero confirmation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 453-491, February.
    4. Bokolo Anthony Jnr., 2022. "Toward a collaborative governance model for distributed ledger technology adoption in organizations," Environment Systems and Decisions, Springer, vol. 42(2), pages 276-294, June.
    5. Gu, Chao & Monnet, Cyril & Nosal, Ed & Wright, Randall, 2023. "Diamond–Dybvig and beyond: On the instability of banking," European Economic Review, Elsevier, vol. 154(C).
    6. Sebastian Edwards, 2021. "Macroprudential Policies and The Covid-19 Pandemic: Risks and Challenges For Emerging Markets," NBER Working Papers 29441, National Bureau of Economic Research, Inc.
    7. Raphael Auer & Codruta Boar & Giulio Cornelli & Jon Frost & Henry Holden & Andreas Wehrli, 2021. "CBDCs beyond borders: results from a survey of central banks," BIS Papers, Bank for International Settlements, number 116.
    8. Ferry Syarifuddin & Toni Bakhtiar, 2021. "Monetary Policy Strategy In The Presence Of Central Bank Digital Currency," Working Papers WP/09/2021, Bank Indonesia.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G2 - Financial Economics - - Financial Institutions and Services
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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