We characterize equilibrium leverage dynamics in a trade‐off model in which the firm can continuously adjust leverage and cannot commit to a policy ex ante. While the leverage ratchet effect leads shareholders to issue debt gradually over time, asset growth and debt maturity cause leverage to mean‐revert slowly toward a target. Investors anticipate future debt issuance and raise credit spreads, fully offsetting the tax benefits of new debt. Shareholders are therefore indifferent toward the debt maturity structure, even though their choice significantly affects credit spreads, leverage levels, the speed of adjustment, future investment, and growth.

The rise of centralized mining pools for risk sharing does not necessarily undermine the decentralization required for blockchains: because of miners’ cross-pool diversification and pool managers’ endogenous fee setting, larger pools better internalize their externality on global hash rates, charge higher fees, attract disproportionately fewer miners, and grow more slowly. Instead, mining pools as a financial innovation escalate miners’ arms race and significantly increase the energy consumption of proof-of-work-based blockchains. Empirical evidence from Bitcoin mining supports our model’s predictions. The economic insights inform other consensus protocols and the industrial organization of mainstream sectors with similar characteristics but ambiguous prior findings.