Related papers: Trading under the Proof-of-Stake Protocol -- a Con…
The core of a blockchain network is its consensus algorithm. Starting with the Proof-of-Work, there have been various versions of consensus algorithms, such as Proof-of-Stake (PoS), Proof-of-Authority (PoA), and Practical Byzantine Fault…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
Accountability, the ability to provably identify protocol violators, gained prominence as the main economic argument for the security of proof-of-stake (PoS) protocols. Rollups, the most popular scaling solution for blockchains, typically…
We study the stochastic control problem of maximizing expected utility from terminal wealth under a non-bankruptcy constraint. The wealth process is subject to shocks produced by a general marked point process. The problem of the agent is…
The paper examines decentralized cryptocurrency protocols that are based on the use of internal tokens as identity tools. An analysis of security problems with popular Proof-of-stake consensus protocols is provided. A new protocol,…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
This paper presents a novel staking coopetition design aimed at incentivizing decentralization and continuous growth of economic security within a proof-of-stake system. Staking rewards follow a nonlinear mapping relative to stake size.…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
We characterize the value of swing contracts in continuous time as the unique viscosity solution of a Hamilton-Jacobi-Bellman equation with suitable boundary conditions. The case of contracts with penalties is straightforward, and in that…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
We analyze the economic incentives generated by the proof-of-stake mechanism discussed in the Ethereum Casper upgrade proposal. Compared with proof-of-work, proof-of-stake has a different cost structure for attackers. In Budish (2018),…
The increasing penetration of renewable energy sources in day-ahead energy markets introduces challenges in balancing supply and demand, ensuring grid resilience, and maintaining trust in decentralized trading systems. This paper proposes a…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
We reveal an interesting convex duality relationship between two problems: (a) minimizing the probability of lifetime ruin when the rate of consumption is stochastic and when the individual can invest in a Black-Scholes financial market;…
In this paper we consider an energy storage optimization problem in finite time in a model with partial information that allows for a changing economic environment. The state process consists of the storage level controlled by the storage…
Proof of Work (PoW) has extensively served as the foundation of blockchain's security, consistency, and tamper-resistance. However, long has it been criticized for its tremendous and inefficient utilization of computational power and…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
This paper introduces a heterogeneous macroeconomic model of a Proof-of-Stake (PoS) network to analyze the long-term centralizing effects of external traditional finance (TradFi) yields. We model a continuum of rational actors divided into…
Mining blocks in a blockchain using the \textit{Proof-of-Work} consensus protocol involves significant risk, as network participants face continuous operational costs while earning infrequent capital gains upon successfully mining a block.…