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Discussion Paper
Interoperability of Blockchain Systems and the Future of Payments
In a previous post, we introduced a three-pillar framework for interoperability of payment systems and discussed how technological, legal, and economic factors contribute to achieve interoperability and aid in the “singleness of money”—that payments and exchange are not subject to volatility in the value of the money itself—in the context of legacy systems. In this post, we use the framework to characterize the interoperability of blockchain systems and propose a methodology for evaluating interoperability. We show evidence of limited interoperability and draw insights for the future ...
Report
Regulating Decentralized Systems: Evidence from Sanctions on Tornado Cash
Blockchain-based systems are run by a decentralized network of participants and are designed to be censorship-resistant. We use sanctions imposed by the U.S. Department of Treasury on Tornado Cash (TC), a smart contract protocol, to study the impact and effectiveness of regulation in decentralized systems. We document an immediate and lasting impact on TC following the sanction announcement, measured by market reaction, transaction volume, and diversity of users. Still, net flows into TC contracts recover to and surpass pre-announcement levels for most pools, supporting viability of TC. ...