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3/7: Agostino Capponi – Second-Generation Blockchains: Incentives, Adoption, and Transparency

March 7, 2022 @ 3:30 pm - 4:30 pm

Abstract: Blockchain is a distributed ledger technology built around the principles of transparency and decentralization. Initially conceived as the backbone technology to enable cryptocurrency payments, blockchain has expanded to support a large class of business applications, ranging from financial to supply chain services.

In this talk, we argue that the current design of second generation blockchains may severely limit the adoption of decentralized financial innovations. We begin by discussing adoption of automated Market Makers (AMMs), the most prominent class of blockchain-based decentralized exchanges (DEX). Using game theoretical models, we show that limited adoption arises because of the fee-based order-processing mechanism and the liquidity pooling nature of DEX. We then study adoption problems of private communication channels, proposed to address the information leakage problem created by full transparency on pending blockchain financial transactions. We show that these channels cannot fully align the economic incentives of users and validators, and do not completely eliminate inefficiencies resulting from information leakage, such as frontrunning risk and high transaction costs.
We conclude with a brief highlight of research challenges in the context of blockchain technologies, with focus on operations management and financial services. (based on joint work with Ruizhe Jia).

Biography: Agostino Capponi is an Associate Professor in the IEOR Department at Columbia University, where he is also a member of the Data Science Institute. Agostino’s research interests are in financial technology, market microstructure, and economic networks. Agostino’s research has been funded by major public agencies and private corporations, including the NSF, DARPA, U.S. Department of Energy, IBM, the Institute for New Economic Thinking, and the Global Risk Institute. Agostino is an Editor of Management Science in the Finance Department. He also serves as a co-editor of Mathematics and Financial Economics, and as the financial engineering area editor of Operations Research Letters. Agostino is an associate editor of Operations Research, Finance and Stochastics, SIAM Journal on Financial Mathematics, Applied Mathematical Finance, Stochastic Systems, and Stochastic Models. He served as a Chair of the SIAM Activity group in Financial Mathematics and Engineering, and of the INFORMS Finance Section. Agostino is a recipient of the NSF CAREER Award, and of the 2019 JP Morgan AI Faculty Research Award. Agostino is a fellow of the Crypto and Blockchain Economic Research Forum, an external research fellow of the Fintech@Cornell initiative, and an academic fellow of the Luohan Academy established by the Alibaba Group.


March 7, 2022
3:30 pm - 4:30 pm
Event Category:


Zoom Webinar (Virtual)


Berkeley IEOR
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