What's Holding Back Blockchain Finance? On the Possibility of Decentralized Autonomous Finance
AIER Sound Money Project Working Paper No. 2019–06
30 Pages Posted: 20 May 2019 Last revised: 10 Feb 2020
Date Written: February 8, 2020
Despite the rapid innovation of the past decade in adapting blockchain technology to new uses, financial intermediation remains elusive except in basic and highly collateralized forms. This paper considers the prospects for lending and financial intermediation on the blockchain. For its various forms, ranging from collateralized direct lending to fractional-reserve lending and securitization, we ask (1) how much trust is necessary for a functional market, and (2) what kinds of off-chain market institutions would be necessary to supplement the blockchain's trustless technical scaffolding? We conclude by surveying several recent technical and institutional developments in the blockchain space, and the possibilities for financialization that they point toward.
Keywords: Banking, Blockchain, Financial Intermediation, Decentralized Organizations
JEL Classification: E42, E51, G21
Suggested Citation: Suggested Citation