Review of Financial Studies Vol. 32 No. 5 2019
Blockchain-Based Settlement for Asset Trading
Abstract
Can securities be settled on a blockchain, and, if so, what are the gains relative to existing settlement systems? The main benefit of a blockchain is faster and more flexible settlement, whereas settlement fails need to be ruled out where participants fork the chain to cancel trading losses. With a proof-of-work protocol, the blockchain needs to restrict settlement speed through block size and time in order to generate transaction fees, which finance costly mining. Despite mining being a deadweight cost, our estimates for the U.S. corporate debt market yield net gains from a blockchain in the range of 1–4 bps. Received May 31, 2017; editorial decision May 29, 2018 by Editor Itay Goldstein.
- DOI
- 10.1093/rfs/hhy122
- Volume
- 32
- Issue
- 5
- Pages
- 1716-1753
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref