OASIcs.Tokenomics.2021.8.pdf
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Optimal Design of Tokenized Markets
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3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021)
Series: Open Access Series in Informatics (OASIcs)
Conference: International Conference on Blockchain Economics, Security and Protocols (Tokenomics) - License:
Creative Commons Attribution 4.0 International license
- Publication Date: 2022-03-18
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Michael Junho Lee, Antoine Martin, and Robert M. Townsend. Optimal Design of Tokenized Markets. In 3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021). Open Access Series in Informatics (OASIcs), Volume 97, p. 8:1, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2022)
https://doi.org/10.4230/OASIcs.Tokenomics.2021.8
https://doi.org/10.4230/OASIcs.Tokenomics.2021.8
Abstract
Trades in today’s financial system are inherently subject to settlement uncertainty. This paper explores tokenization as a potential technological solution. A token system, by enabling programmability of assets, can be designed to eradicate settlement uncertainty. We study the allocations achieved in a decentralized market with either the legacy settlement system or a token system. Tokenization can improve efficiency in markets subject to a limited commitment problem. However, it also materially alters the information environment, which in turn aggravates a hold-up problem. This limits potential gains from resolving settlement uncertainty, particularly for markets that depend on intermediaries.
Subject Classification
ACM Subject Classification
- Social and professional topics → Computing / technology policy
- Computer systems organization → Distributed architectures
Keywords
- Tokenization
- programmability
- settlement uncertainty
- asymmetric information
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