Equation 3

This page collects my work on cryptocurrencies and blockchains. My main conceptual idea in this area is in equations (1)-(3) of the June 2018 “Economic Limits” paper, significantly updated in June 2022. These equations show that the anonymous, decentralized trust invented by Satoshi Nakamoto is very expensive: the ongoing, “flow” cost of maintaining the trust has to be large relative to the one-off, “stock” value of attacking the system.

I have been watching this area with interest for the last several years, and recently completed a significant update of the June 2018 short paper into a more complete research paper. The June 2022 update expands the analysis of double-spending attacks, sabotage attacks and collapse scenarios. It also contains an appendix that discusses some of the responses to the June 2018 version.

Selected Materials

Research Papers

The Economic Limits of Bitcoin and Anonymous, Decentralized Trust on the Blockchain

Quarterly Journal of Economics, Reject-and-Resubmit.
June 2018 version, NBER Working Paper No. 24717
Harvard Harris Lecture: The Economics of Cryptocurrencies (November 2022)
[PDF] [Slides] [All Related Material]

June 2018 version, NBER Working Paper No. 24717

National Bureau of Economic Research Working Paper Series, No. 24717, 2018.
[PDF] [All Related Material]

Talks and Public Discussion

High-Frequency Trading and the Design of Financial Markets

a16z Seminar, July 24, 2023.
[Slides] [All Related Material]

The Economic Limits of Cryptocurrencies and Anonymous, Decentralized Trust on the Blockchain (April 2023)

Booth All-Faculty Seminar, April 18, 2023.
[Slides] [All Related Material]

Harvard Harris Lecture: The Economics of Cryptocurrencies (November 2022)

Harris Lecture at Harvard University, November 9, 2022.
[Slides] [All Related Material]

Freakonomics Podcast, Does the Crypto Crash Mean the Blockchain Is Over?

Coauthors: Stephen J. Dubner
Freakonomics Podcast, June 2022.
[PDF] [All Related Material]

The Economics of Cryptocurrencies (April 2022)

Oxford University Economics Department, April 6, 2022.
[All Related Material]

Presentation on Bitcoin Research at the May 2019 Atlanta Fed Financial Markets Conference

Atlanta Fed Financial Markets Conference, May 19, 2019.
Transcript and audio recording, Atlanta Fed
[PDF] [Slides] [All Related Material]

AFA panel “Blockchain: Myth and Reality”

The American Finance Association, January 4, 2019.
[All Related Material]

Bitcoin Is Less Secure Than Most People Think

Coauthors: Alex Tabarrok
Marginal Revolution, January 7, 2019.
[PDF] [All Related Material]

Bitcoin Looks More Like Gold Than a Currency

Coauthors: Noah Smith
Bloomberg, July 11, 2018.
[PDF] [All Related Material]