Katya Malinova PRO
I am an Associate Professor, Mackenzie Investments Chair in Evidence-Based Investment Management at the DeGroote School of Business, McMaster University, Canada.
The public blockchain ecosystem: An empirical analysis
Discussion by Katya Malinova
Felix Irresberger, Kose John, Fahad Saleh
NFA 2020
\(\Rightarrow\) Empirically identify a "Blockchain frontier"
Provide an "organizing framework"
- How to characterize these?
- What do "users" value?
- What makes some more prominent/dominant than others?
Many, many blockchain platforms: 908 native crypto-assets!
Key Contributions
\(\Rightarrow\) "Blockchain frontier" = 8 blockchains that are not dominated w.r.t.
- adoption, scale, security
The cost of using the blockchain decreases in
- Blockchain adoption \(\to\) easier to find a coffee shop that takes crypto
- Blockchain scale (=capacity) \(\to\) faster transaction processing on the blockchain
- Blockchain security \(\to\) coffee brewer requires fewer blocks to be confirmed after yours
Users derive utility from transacting on a blockchain, but have to pay a ("waiting") cost
Basic Approach
Scale (= transaction throughput) vs Adoption
- measured as a maximal observed transaction rate
- \(\to\) high enough scale requires sufficient adoption?
Comment 1: interdependence of the characteristics?
Security vs Adoption
- Higher security \(\to\) the merchant requires fewer blocks to be confirmed after yours before transferring the good
- Longer confirmation \(\to\) higher chance of payment but fewer customers
- \(\to\) Is there a "risk-return" trade-off?
- Lower confirmation times when adoption (& the cost of customer loss) are high?
Scale & Fees vs. Security
- Higher scale \(\to\) less willing to pay to get in front of the queue \(\to\) lower fees ...
- One side of the argument? How is security obtained? Who pays for it? (Pagnotta (2020)).
Key insight: "Three blockchain characteristics drive user utility"
Comment 2: who are the users?
But who are the users?
- A coffee drinker?
- A coffee shop?
- A developer for a coffee shop app? Cool tools/tokens for video games?
- ... ?
The paper focusses on: blockchain = payment system
What about differences in blockchain functionality?
Crypto markets are staging a comeback: in "Decentralized Finance"
Text
Source: https://defipulse.com
Who and what should we think of re: blockchain dominance?
- Role of developers?
- Language? Skill/app transferability?
Comments 2 (Cont'd): Users and Usage ...
EOS has a high throughput, but DeFi is on Ethereum
Multiple Dimensions of Functionality
- Utility from DeFi apps?
Comment 3: Network Effects ...
Network effects \(\to\) only a few standards can prevail (but which ones???)...
- Betamax vs VHS
- HD DVD vs Blue Ray
- Microsoft Windows ...
Network effects ...
- Higher user adoption is only part of it (direct effects ...)
- Indirect effects will likely play a huge role in shaping the frontier...
- Increased variety of services?
- Compatibility? Developer support and involvement?
Déjà vu? Browser Wars?
Summer 1996 Microsoft marketing plan presentation
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NFA 2020. Discussion of "The public blockchain ecosystem: An empirical analysis" by Felix Irresberger, Kose John, Fahad Saleh
By Katya Malinova
NFA 2020. Discussion of "The public blockchain ecosystem: An empirical analysis" by Felix Irresberger, Kose John, Fahad Saleh
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