Economic analysis of the transformative potential and optimal design of distributed ledger technology (DLT), discussing key components and applications.
DLT (and the related, but not synonymous, innovations of blockchain and Bitcoin) have the potential to transform economic organizations and financial structures. Yet, the subject is embroiled in controversy, hype, and terminological inconsistencies. Rather than get waylaid by alternative possible definitions of distributed ledgers, or decentralized ledgers, the book focuses more broadly on an economic analysis of what DLT can do. It begins by analyzing key individual components, comparing and contrasting the economics framework with the frameworks of computer science and data management disciplines to clarify the technology and initiate steps to combine these disciplines.
The book also covers familiar but key component parts of distributed ledgers: ledgers as financial accounts, e-messages and e-value transfers, cryptography, and contracts including multi-party mechanisms. Each component is discussed, evaluated, and illustrated through the context of historical and contemporary economies, with featured applications in both developed economies and emerging-market countries. These use cases are a hallmark of the monograph. A recurrent focus is the general-equilibrium impact of innovations and welfare gains from innovations featuring key components.