What's Holding Back Blockchain Finance? On the Possibility of Decentralized Autonomous Finance

AIER Sound Money Project Working Paper No. 2019–06

NDSU Public Choice and Private Enterprise Research Paper Forthcoming

30 Pages Posted: 20 May 2019 Last revised: 10 Feb 2020

See all articles by Cameron Harwick

Cameron Harwick

SUNY College at Brockport

James Caton

North Dakota State University - Department of Agribusiness and Applied Economics; American Institute for Economic Research; North Dakota State University - NDSU Center for the Study of Public Choice and Private Enterprise

Date Written: February 8, 2020

Abstract

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

Harwick, Cameron and Caton, James, What's Holding Back Blockchain Finance? On the Possibility of Decentralized Autonomous Finance (February 8, 2020). AIER Sound Money Project Working Paper No. 2019–06; NDSU Public Choice and Private Enterprise Research Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=3373382 or http://dx.doi.org/10.2139/ssrn.3373382

Cameron Harwick

SUNY College at Brockport ( email )

Brockport, NY 14420
United States

HOME PAGE: http://cameronharwick.com

James Caton (Contact Author)

North Dakota State University - Department of Agribusiness and Applied Economics ( email )

Fargo, ND 58105
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

North Dakota State University - NDSU Center for the Study of Public Choice and Private Enterprise

811 2nd Ave N.
Fargo, ND 58102
United States

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