As tokenization of traditional financial assets gains regulatory attention, a fundamental question demands rigorous analysis: Can blockchain technology provide secure settlement? In a new paper with @camharvey (@DukeU) and Kose John (@NYUStern), we develop an economic model to address this question. Our analysis yields two main insights. First: blockchain security is tied to blockchain productivity. A blockchain generating more economic value for users can share that value with validators through higher staking rewards. In turn, higher rewards attract more staked capital, raising the cost for any adversary seeking to disrupt settlement. Second: under reasonable conditions, a PoS blockchain can be secured against arbitrarily large attack incentives. This may seem surprising, but it follows from a familiar financial phenomenon that prior blockchain literature has overlooked: price impact. To disrupt settlement, an attacker must acquire a large fraction of the blockchain's native asset. However, staked assets are subject to withdrawal delays and cannot be traded immediately, so a higher staking ratio translates directly into a smaller circulating float of the blockchain's native asset. In particular, the attacker must acquire what they need from unstaked assets, and buying a large share of a small supply drives up the price. This is where the economics become powerful. Higher staking rewards attract more capital into staking, which shrinks circulating supply, amplifying the price impact an attacker would face. Because staking responds to incentives, the staking ratio can be engineered to achieve a desired level of security. Our model shows that, by setting staking rewards appropriately, price impact can be made arbitrarily large, rendering attacks unprofitable regardless of potential gains. A concrete illustration: Ethereum currently has roughly 30% of ether staked. A majority attack would require purchasing another 30% from the 70% in circulation. Our model shows this generates a price impact of approximately 75%, a cost prior literature has failed to incorporate. Importantly, 75% reflects current staking levels. By increasing staking incentives to raise the staking ratio, price impact can be made larger. This is precisely how a blockchain can be secured against arbitrarily large attack incentives. 📄 Paper: papers.ssrn.com/sol3/papers.…

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🚨Blockchain conference on Oct 29 - 30 @Columbia, Co-organized by CBER Forum and @CUSEAS 🚨 Speakers include @HarryDCrane, @RuizheJia, @_julianma, @malleshpai, @casparschwa, @kakia1989, @EdFelten, @AlvaroCartea, @sui414, @financeUTM, @MaxResnick, @camharvey and @taylor_lindman Topics include prediction markets, stablecoins, quantum and tokenization. Full program and registration are at cglink.me/21U/r376457

Permissionless blockchains enable frictionless barter. Specifically, if you can swap your preferred asset positions into whatever unit of account a merchant accepts (e.g., through a DEX) at the point of purchase, then you don't need to hold cash for payments. Economically, this means that blockchains relax the cash-in-advance constraint in monetary economic models.

🚨NEW: The @CFTC has submitted its crypto rulemaking to the White House for review. The proposed rule is titled “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets.” It comes just two days after @ChairmanSelig said the agency was “locked in and ready to ship rules” following the Senate’s failure to advance crypto market structure legislation.

I see where you're coming from and as a first order effect your view is not wrong. But:there are also many ways how on-chain markets can improve on traditional markets. An obvious issue is data which is free on-chain. But we can also think about much better (=cheaper) ways to organize trading. As shameless self-promotion, @katyamalinova and I have two papers on this: papers.ssrn.com/abstract=743… papers.ssrn.com/abstract=453… The big thing is that it's simply a mistake to think that today's markets are optimal. They aren't. And it's not just a question of tweaking regulation.

Indeed, the big (if not the most important) question is demand. That concern is legitimate, and we model exactly this aspect in our paper (papers.ssrn.com/sol3/papers.…). Our model shows that a reduction in regulations (such as by exemptions) enables tokenization to succeed… (1/2)

It’s “trump is a grifter” (true) or “the Democrats are communists” (true) but never “maybe a third additional reason clarity failed is because crypto has done virtually nothing for the lives of the median American, the notion that this is a grassroots movement is entirely fabricated, at least greatly exaggerated, evidenced by last election cycle’s biggest donor class being able to get their people elected with money but when it came time to vote on a comparatively tame piece of legislation there was just no demand, no outraged constituents begging to tokenize helocs, no wine aunts demanding to speak with their rep about how perps should be classified, that’s just not a real person that exists in our society, we have Venmo and we have many ways to gamble already. It’s mainly just suits versus suits and whatever outcome, most people will be just fine, moisturized, in their lane etc etc. Americans do call their senators about data centers and abortion but they just don’t call their senators about crypto because it’s not very important one way or another, this is not even occupy Wall Street, flip a coin, they don’t really care and so senators decided the cost of voting for something people are apathetic about was greater than the cost of voting against something people are apathetic about. Almost no introspection on this

.@CFTC Staff Issues No-Action Position to Providers of Passive Software: cftc.gov/PressRoom/PressRele…

🚨NEW: The @CFTC is also delivering some regulatory clarity for crypto markets today. Staff is clearing the way for software developers to build tools connecting users to registered futures firms and exchanges without having to register as brokers.

My statement on the Inn Ex, as I am calling it: sec.gov/newsroom/speeches-st…

🚨 TODAY: The SEC issued an order granting temporary, conditional exemptive relief to Tokenized Securities Venues from the definition of “exchange” in the Exchange Act to trade tokenized NMS stock using innovative permissioned automated market makers and liquidity pools.

The innovation exemption is an actual thing: sec.gov/newsroom/press-relea…

...the best defense against a hostile future administration isn't a law or a regulation. It's adoption.

The best a constructive regulator can do is revise rules, within the authorities granted by Congress, to move the ball forward. But a constructive regulator is only as effective as the extent and quality of engagement it gets from industry. We have constructive regulators in the US (for now). Is industry engaging them enough? And where industry engages, does industry internalize the limits of regulatory power granted by Congress so as to ensure that paths forward suggested are actually feasible? I am not sure...

🚨NEW: A group of Senate Democrats are expected to meet this evening to discuss strategy on the Clarity Act and coordinate on a counterproposal to the text Republicans released last night, despite the GOP’s insistence that it is their “last, best and final” offer. Comes less than 24 hours before the bill’s first big test on the Senate floor.

🚨NEWS: Senate Republicans have released new Clarity Act text featuring a revised ethics proposal agreed to by President Trump. The text also contains changes to the sections on the Blockchain Regulatory Certainty Act (BRCA), stablecoin yield, and the so-called “Ag title.” Republicans are calling it their “last, best and final” offer to Democrats ahead of Tuesday’s cloture vote. Some high-level details.👇🏼 On BRCA: The provision has been narrowed to the Bank Secrecy Act and civil enforcement. Specific language extending its protections to criminal cases, including prosecutions under Section 1960, has been removed. On ethics: Trump has agreed to what a GOP aide describes as “80%” of the Tillis-Gallego ethics proposal including to either divest “substantial” crypto-related financial interests or place them in a blind trust. It would also allow a role for state attorneys general to enforce ethics provisions, something which the White House had previously balked at. On yield: Added “circuit breaker” language (floated by Tillis in July) that would effectively act as a backstop by allowing federal regulators to intervene if there was evidence of widespread deposit flight from community banks to stablecoins. The federal regulator that will be the arbiter of this: Treasury Secretary Scott Bessent. On Ag: The updated text adds tighter guardrails around vertical integration, including affiliate trading and conflicts of interest involving digital commodity exchanges, brokers and dealers. It also clarifies that state consumer protection laws still apply and that developer protections do not create exemptions from derivatives laws or impact prediction markets. More to come in the @CryptoAmerica_ newsletter tomorrow AM.

Crucially, the translation between statements and proofs is done by the LLM - the same LLM who claims to have done the proof correctly. The incentives are not exactly right. Ideally, one party should publish the challenge to prove in Lean code, the other would have to prove it.

Respectfully, anyone who tells you they know with certainty, one way or another, what will happen on Tues is trying to sell you something or increase their influence The truth is, we don’t know what will happen come Tues, but there has been a necessary thawing this past week, and key conversations are continuing into the weekend I understand the optimism about the innovation exemption, but we must also be realistic in our expectations One exemption is no replacement for the statutory certainty of clarity and would do nothing on the CEA front or the BRCA

The most important barometer for the long-term health of Robinhood is organic inflows into their tokenized equities. The two parts to the tokenized equities thesis are (a) anyone in the world irrespective of their demographic can have exposure to companies & (b) equities benefit from 24/7 settlement, advanced capital efficiency, etc. Part B of this thesis is fully reliant on Part A. We will only see true capital efficiency unlocks (e.g. collateral on lending markets) once we have established sufficient demand for the tokenized equities. Right now, the majority of demand for Robinhood assets is originating from memecoins paired with the stock tokens themselves. This isn't validation of the Robinhood chain thesis, and doesn't serve a real purpose outside of speculation. On NVDA, their largest stock token with ~$12M TVL, my estimation is ~18% (~$2.2M) is held by individual accounts seeking directional exposure. ~62% of the supply is in liquidity pools. It's in the early innings, and my hunch is that the Robinhood network will succeed alongside real organic demand for their stock tokens. However, there's a lot of work to do on that side to ensure demand goes up and to the right.