IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/16752.html

Distributed Ledgers and the Governance of Money

Author

Listed:
  • Auer, Raphael
  • Shin, Hyun Song
  • Monnet, Cyril

Abstract

Blockchain technology breathes new life into the classical analysis of money as a substitute for a ledger of all past transactions. While it involves updating the ledger through a decentralized consensus on the unique truth, the robustness of the equilibrium that supports this consensus depends on who has access to the ledger and how it can be updated. To find the optimal solution, Buterin’s “scalability trilemma†needs to be addressed, so that a workable balance can be found between decentralization, security (i.e. a robust consensus), and scale (the efficient volume of transactions). Using a global game analysis of an exchange economy with credit, we solve for the optimal ledger design that balances the three objectives of this trilemma. We characterize the optimal number of validators, supermajority threshold, fees and transaction size. When intertemporal incentives are strong, a centralized ledger is always optimal. Otherwise, decentralization may be optimal, and validators need to be selected from the set of users of the system.

Suggested Citation

  • Auer, Raphael & Shin, Hyun Song & Monnet, Cyril, 2021. "Distributed Ledgers and the Governance of Money," CEPR Discussion Papers 16752, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16752
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP16752
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. is not listed on IDEAS
    2. Raphael Auer & Rainer Boehme, 2021. "Central bank digital currency: the quest for minimally invasive technology," BIS Working Papers 948, Bank for International Settlements.
    3. Raphael Auer & Codruta Boar & Giulio Cornelli & Jon Frost & Henry Holden & Andreas Wehrli, 2021. "CBDCs beyond borders: results from a survey of central banks," BIS Papers, Bank for International Settlements, number 116, May.
    4. Mario DeSean Booker & FaLessia Camille Booker, 2025. "Currency of Change: Encrypting the Future of Monetary Governance," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(7), pages 655-663, July.
    5. Han, Jungsuk & Lee, Jongsub & Li, Tao, 2025. "A review of DAO governance: Recent literature and emerging trends," Journal of Corporate Finance, Elsevier, vol. 91(C).
    6. C, Viviana Alfonso & Kamin, Steven & Zampolli, Fabrizio, 2025. "Central bank digital currencies (CBDCs) in Latin America and the Caribbean," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 6(1).
    7. Verdier, Marianne, 2024. "Digital payments and bank competition," Journal of Financial Stability, Elsevier, vol. 73(C).
    8. Kee-Youn Kang, 2023. "Cryptocurrency and double spending history: transactions with zero confirmation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 453-491, February.
    9. Joseph Abadi & Markus Brunnermeier, 2018. "Blockchain Economics," NBER Working Papers 25407, National Bureau of Economic Research, Inc.
    10. Bokolo Anthony Jnr., 2022. "Toward a collaborative governance model for distributed ledger technology adoption in organizations," Environment Systems and Decisions, Springer, vol. 42(2), pages 276-294, June.
    11. Sebastian Edwards, 2021. "Macroprudential Policies and The Covid-19 Pandemic: Risks and Challenges For Emerging Markets," NBER Working Papers 29441, National Bureau of Economic Research, Inc.
    12. Ferry Syarifuddin & Toni Bakhtiar, 2021. "Monetary Policy Strategy In The Presence Of Central Bank Digital Currency," Working Papers WP/09/2021, Bank Indonesia.
    13. Gu, Chao & Monnet, Cyril & Nosal, Ed & Wright, Randall, 2023. "Diamond–Dybvig and beyond: On the instability of banking," European Economic Review, Elsevier, vol. 154(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G2 - Financial Economics - - Financial Institutions and Services
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    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:cpr:ceprdp:16752. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    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.