Foundations of Transaction Fee Mechanism Design was presented in the Highlights Beyond EC plenary session at EC’22!
The authors prove a new impossibility result: assuming finite block size, no single-parameter, non-trivial, possibly randomized transaction fee mechanism (TFM) can simultaneously satisfy UIC and 1-SCP. They also rethink incentive compatibility and consider the impact of new design elements.
Hao Chung and Elaine Shi (both CMU)
While stability lasts: A stochastic model of noncustodial stablecoins was published in Mathematical Finance!
The authors develop a stochastic model that helps explain deleveraging crises in over-collateralized stablecoin systems. They also discuss noncustodial ways these issues can be mitigated.
Ariah Klages-Mundt and Andreea Minca (Cornell)
Decentralized Governance of Stablecoins with Closed Form Valuation was presented at MARBLE!
The authors model incentive security in non-custodial stablecoins and derive conditions for participation. They apply option pricing theory to derive closed form solutions to the stakeholders’ problems, and to value their positions. They derive the optimal, incentive compatible interest rate, as well as conditions for the existence of equilibria, and discuss design implications.
Lucy Huo, Ariah Klages-Mundt, Andreea Minca (all Cornell), Frederik Christian Münter, Mads Rude Wind (both Copenhagen University)