Public crypto networks as financial market infrastructures

Abstract

The design of financial instruments and processes has always been contingent on the infrastructure such products live on. Blockchain technology, as utilized by public crypto networks such as Ethereum, represents a novel type of payment and settlement infrastructure that gives rise to a new generation of solutions. We discuss the properties of this technology such as immediacy, omni-asset capability, programmability, and ability to flatten the financial architecture (disintermediation). We provide examples of the unique products they enable, some of which might disrupt today's dominant payment and capital market solutions in the future. We discuss the utility of blockchain technology in private (permissioned) networks. Finally, we revisit the risks of public crypto networks and their mitigants.

JEL Classification: G20, E42