Contents

1. Preface
2. Acknowledgments
3. 1     Introduction
4. 2     Economies, Obstacles, Welfare, and Measurement
5. 3     Ledgers as Financial Accounts
6. 4     E-Payments, E-Messages, and Trusted Third Parties in Payment Systems
7. 5     Encryption
8. 6     Smart Contracts: Contract Theory and Mechanism Design
9. 7     Design Issues: Partitioned Ledgers, the Decision to Decentralize Implementation in Multiparty Contracts, and Incentive-Compatible Token Payment Systems
10. 8     Building Financial Infrastructure on Distributed Ledgers: Practical Application in Emerging Markets
11. 9     Payment Systems on Distributed Ledgers: Practical Applications
12. 10   Regulation and the Use of Distributed Ledger Technology
13. 11   Cryptocurrency: The Role and Value of Tokens in Economies with Distributed Ledger Systems
14. 12   Summary and Conclusion
15. References
16. Index
17. List of Figures
18. Figure 2.1
19. Schemata of financial accounts and agent interaction through smart contract. Agents A and B with financial accounts are sending messages from an a priori message space; these messages are input into a designed smart contract and execute a transfer that alters the financial accounts. Source: Nicolas Zhang (2019).
20. Figure 2.2
21. Illustrative time line of events within a given period t under a contract. The agent observes its current underlying state, et, then takes an action a1t, determining publicly observed state yt, which in turn activates transfer τt. Then, toward the end of the period, the agent takes another action, a2t, resulting in utility as a function of these actions and events U(et, a1t, yt, τt, a2t). At date t + 1, the state et+1 is realized (determined in part by previous actions) and the time line of t repeats at t + 1, and so on.
22. Figure 4.1
23. Illustrative movement of currency balances for a selected household. Erratic but increasing levels of currency over time, with sharp drop at the end.
24. Figure 4.2
25. Swedish currency (SEK) in levels and relative to GDP.
26. Figure 4.3
27. M-Pesa adoption rates for the entire Kenyan population as well as for the poor, the lowest income quartile, and those with no bank account.
28. Figure 4.4
29. A schemata of the operational flows of the Kenyan M-Pesa system. An exchange of Kenya shillings, marked as $, for cell phone credits, marked as e, with a Safaricom agent; use of this e-money by the customer for purchases or remittances; and a larger picture of the flows of e-money and the cash throughout the system.
30. Figure 5.1a
31. Mesopotamia tokens.
32. Figure 5.1b
33. Figure 5.2
34. Medieval English tally sticks.
35. Figure 5.3
36. A decision to burn the obsolete tally sticks in 1834 nearly destroyed the Palace of Westminster.
37. Figure 5.4
38. Mesh communication networks and star communication networks. The figure on the left shows how nodes N are connected to each other. The figure on the right displays a classic star network with a central node.
39. Figure 11.1
40. The Turnpike model of monetary exchange. The arrows denote the direction of travel. Each agent type starts at some trading post marked with a vertical line connecting the two lanes of the highway. The numbers denote the endowment of the consumption good of the agent as the agent travels.
41. List of Tables
42. Table 3.1
43. Comprehensive financial accounts: balance sheet of household A.
44. Table 3.2
45. Comprehensive financial accounts: income statement of household A.
46. Table 3.3
47. Comprehensive financial accounts: statement of cash flow of household A.
48. Table 4.1
49. Money in terms of monthly consumption.
50. Table 7.1
51. Partitioned private ledgers and the gains from concealment.
52. Table 7.2
53. Colored coins and partitioned private ledgers.
54. Table 10.1
55. Circulating private debt: who meets whom when.
56. List of Boxes
57. Box 6.1
58. Key elements from mechanism design.
59. Box 6.2
60. Dynamic principal and agent problem with moral hazard and promised utility.
61. Box 6.3
62. Limited commitment.