Cryptocurrencies: The Network vs. The Chain.This paper examines whether cryptocurrencies' fast-settlement payment layers can overtake the blockchain's payment function, using the New Monetarist framework. The Chain offers costly, probabilistic settlement, whereas the Network provides instant payments but entails cyberattack risk and adoption costs. In the Chain payments-only benchmark, buyers underinvest in settlement after bargaining, reducing trade efficiency and token value. Introducing the Network generates multiple equilibria. With exogenous cyberattack risk, both payment rails may coexist, and low risk can support a pure Network payments equilibrium, although adoption costs may sustain a Chain payments equilibrium. When cyberattacks are endogenous, broader Network use strengthens hackers’ incentives and eliminates the pure Network payments equilibrium. Network adoption improves welfare only when the efficiency gains exceed the costs of adoption and hacking. Thus, fast-settlement layers could improve payments' efficiency but cannot generically overtake the payment function of the base layers.
Experimental Evidence on the Behavioral (In)Efficiency of Search-and-Matching Market Institutions. (With Kenneth Chan).We design a lab experiment to study three different search-and-matching market institutions: (1) price posting with directed search, (2) bargaining with directed search, and (3) bargaining with a guaranteed match. We compare their performance in terms of market efficiency, goods prices, and subjects’ preferences for different market institutions. We find that the price-posting market with directed search is the most efficient, has the lowest prices (a more equitable split of surpluses), and is the most preferred market institution among our experimental subjects.
