Maureen O’Hara, Global Virtual Seminar Series on Fintech
Date Aired: April 3, 2020
Robert W. Purcell Professor of Finance
Johnson Graduate School of Management, Cornell University
Maureen O’Hara is the Robert W. Purcell Professor of Finance at the Johnson Graduate School of Management, Cornell University, and she also holds a professorship at the University of Technology Sydney.
Professor O’Hara is the author of Market Microstructure Theory (Blackwell 1995) and Something for Nothing: Arbitrage and Ethics on Wall Street (Norton 2016). Her research interests include how ETFs affect market stability; transaction costs in bitcoin; experimental economics; and financial intermediaries.
Blockchain-based cryptocurrencies must solve the issue of assigning priorities to competing transactions. The current, most widely used mechanism is for each transaction to offer a fee, which is paid once the transaction is processed. Empirically, this mechanism, called StableFees, that enables a simple truthful bidding strategy that is nearly optimal. We prove that our proposed protocol is free from manipulation by users and miners as the number of users increases and show empirically that gains from manipulation are small in practice. We show experimentally that StableFees generates about 49% to 103% more welfare for all participants compared to other mechanisms. Additionally, StableFees reduces the fees paid by users, encourages user adoption, and reduces the variance of fee income to miners, allowing for better long term planning and investment in mining infrastructure. Data from December 2017 show that Bitcoin users could have saved $272,528,000 USD in transaction fees while miners could have reduced the variance of fee income, on average, by a factor of 7.4.