‘What Have We Learned from Market Design?’ Blockchain and The Conditions for a Well-Functioning Market

Abstract

Blockchain technologies, specifically those related to cryptocurrencies and non-fungible tokens (NFTs), have recently garnered significant public interest. Blockchain has been lauded as potentially transformative across various industries, including decentralized finance, supply chain management, healthcare, file storage, and more. However, it has also been the source of much investor angst, evidenced by numerous media headlines reporting instances of fraud and catastrophic asset losses. In this paper, we examine whether the current incarnations of blockchain technologies provide a well-functioning market to its participants. We apply Roth’s market design framework to evaluate whether blockchain marketplaces provide safety, thickness, low congestion, and low repugnance. We find that blockchain applications in their current state do not represent a well-functioning market. We conclude by suggesting additional research avenues and explore whether they can still provide value to organizations even in their suboptimal market state.