IDEAS home Printed from https://ideas.repec.org/a/taf/rcejxx/v14y2021i1p4-25.html
   My bibliography  Save this article

What can blockchain do and cannot do?

Author

Listed:
  • Zhong Xu
  • Chuanwei Zou

Abstract

This paper studies the economic functions of blockchain. First, by explaining blockchain technologies from an economic perspective, it introduces the Token Paradigm to summarize mainstream blockchain systems, discusses the true meanings of consensus and trustlessness in the blockchain field, and analyzes the functions of smart contracts. Next, it categorizes major blockchain applications according to how they use tokens and discusses relevant economic problems such as tokens’ monetary features, tokens’ impacts on blockchain platforms, blockchain’s governance functions, and the efficiency and security of blockchain systems. Finally, it discusses the concept of Blockchain as a Financial Infrastructure (BaaFI), which is represented by central bank digital currencies (CBDC) and global stable coins.

Suggested Citation

  • Zhong Xu & Chuanwei Zou, 2021. "What can blockchain do and cannot do?," China Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 4-25, January.
    • Handle: RePEc:taf:rcejxx:v:14:y:2021:i:1:p:4-25
    DOI: 10.1080/17538963.2020.1748968
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/17538963.2020.1748968
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17538963.2020.1748968?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Huberman, Gur & Leshno, Jacob & Moallemi, Ciamac C., 2017. "Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin Payment System," CEPR Discussion Papers 12322, C.E.P.R. Discussion Papers.
    2. Huberman, Gur & Leshno, Jacob D. & Moallemi, Ciamac, 2017. "Monopoly without a monopolist: An economic analysis of the bitcoin payment system," Bank of Finland Research Discussion Papers 27/2017, Bank of Finland.
    3. Gandal, Neil & Hamrick, JT & Moore, Tyler & Oberman, Tali, 2018. "Price manipulation in the Bitcoin ecosystem," Journal of Monetary Economics, Elsevier, vol. 95(C), pages 86-96.
    4. Joshua S. Gans & Neil Gandal, 2019. "More (or Less) Economic Limits of the Blockchain," NBER Working Papers 26534, National Bureau of Economic Research, Inc.
    5. Budish, Eric B., 2018. "The Economic Limits of Bitcoin and the Blockchain," Working Papers 279, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    6. Lin William Cong & Ye Li & Neng Wang, 2021. "Tokenomics: Dynamic Adoption and Valuation [The demand of liquid assets with uncertain lumpy expenditures]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1105-1155.
    7. repec:zbw:bofrdp:2017_027 is not listed on IDEAS
    8. Christian Catalini & Joshua S. Gans, 2016. "Some Simple Economics of the Blockchain," NBER Working Papers 22952, National Bureau of Economic Research, Inc.
    9. Eric Budish, 2018. "The Economic Limits of Bitcoin and the Blockchain," NBER Working Papers 24717, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gupta, Somya & Pandey, Dharen Kumar & El Ammari, Anis & Sahu, Ganesh P., 2023. "Do perceived risks and benefits impact trust and willingness to adopt CBDCs?," Research in International Business and Finance, Elsevier, vol. 66(C).
    2. Yonggen Luo & Miaomiao Fang & Antai Li & Shiqiang Chen, 2024. "Opportunity or opportunism? Blockchain technology adoption and corporate default risk," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanna Halaburda & Guillaume Haeringer & Joshua Gans & Neil Gandal, 2022. "The Microeconomics of Cryptocurrencies," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 971-1013, September.
    2. Zimmerman, Peter, 2020. "Blockchain structure and cryptocurrency prices," Bank of England working papers 855, Bank of England.
    3. Matteo Benetton & Giovanni Compiani, 2024. "Investors’ Beliefs and Cryptocurrency Prices," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 14(2), pages 197-236.
    4. Jonathan Chiu & Thorsten V. Koeppl, 2022. "The economics of cryptocurrency: Bitcoin and beyond," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(4), pages 1762-1798, November.
    5. Bonaparte, Yosef & Bernile, Gennaro, 2023. "A new “Wall Street Darling?” effects of regulation sentiment in cryptocurrency markets," Finance Research Letters, Elsevier, vol. 52(C).
    6. Lin William Cong & Zhiguo He & Jiasun Li & Wei Jiang, 2021. "Decentralized Mining in Centralized Pools [Concentrating on the fall of the labor share]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1191-1235.
    7. Wang, Qiyu & Chong, Terence Tai-Leung, 2021. "Factor pricing of cryptocurrencies," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    8. Brunnermeier, Markus & Abadi, Joseph, 2018. "Blockchain Economics," CEPR Discussion Papers 13420, C.E.P.R. Discussion Papers.
    9. Jermann, Urban J., 2021. "Cryptocurrencies and Cagan’s model of hyperinflation," Journal of Macroeconomics, Elsevier, vol. 69(C).
    10. Michael Sockin & Wei Xiong, 2023. "Decentralization through Tokenization," Journal of Finance, American Finance Association, vol. 78(1), pages 247-299, February.
    11. W. Scott Frame & Larry Wall & Lawrence J. White, 2018. "Technological Change and Financial Innovation in Banking: Some Implications for FinTech," Working Papers 18-28, New York University, Leonard N. Stern School of Business, Department of Economics.
    12. David Cerezo Sánchez, 2022. "Pravuil: Global Consensus for a United World," FinTech, MDPI, vol. 1(4), pages 1-20, October.
    13. Emiliano S Pagnotta, 2022. "Decentralizing Money: Bitcoin Prices and Blockchain Security," The Review of Financial Studies, Society for Financial Studies, vol. 35(2), pages 866-907.
    14. Romi Kher & Siri Terjesen & Chen Liu, 2021. "Blockchain, Bitcoin, and ICOs: a review and research agenda," Small Business Economics, Springer, vol. 56(4), pages 1699-1720, April.
    15. Gilles Hilary & Laura Xiaolei Liu, 2021. "Blockchain and Other Distributed Ledger Technologies in Finance," Springer Books, in: Raghavendra Rau & Robert Wardrop & Luigi Zingales (ed.), The Palgrave Handbook of Technological Finance, pages 243-268, Springer.
    16. Jia, Dun & Li, Yifan, 2023. "Bounded pool mining and the bounded Bitcoin price," Finance Research Letters, Elsevier, vol. 52(C).
    17. Dulani Jayasuriya Daluwathumullagamage & Alexandra Sims, 2021. "Fantastic Beasts: Blockchain Based Banking," JRFM, MDPI, vol. 14(4), pages 1-43, April.
    18. Korniotis, George & Bhambhwani, Siddharth & Delikouras, Stefanos, 2019. "Blockchain Characteristics and the Cross-Section of Cryptocurrency Returns," CEPR Discussion Papers 13724, C.E.P.R. Discussion Papers.
    19. Borri, Nicola & Shakhnov, Kirill, 2023. "Cryptomarket discounts," Journal of International Money and Finance, Elsevier, vol. 139(C).
    20. Hitoshi Matsushima & Shunya Noda, 2020. "Mechanism Design with Blockchain Enforcement," DSSR Discussion Papers 111, Graduate School of Economics and Management, Tohoku University.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rcejxx:v:14:y:2021:i:1:p:4-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rcej .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.