arXiv subjects

Daniel Aronoff

Publications and source records attributed to Daniel Aronoff.

6 recordsLinked to original sources

arXiv2026

TradeMech: A Method to Multilaterally Net Trades Without Altering Counterparty Exposure

Financial markets such as bond, derivatives, and repo markets form networks of interdependent obligations. Existing multilateral netting methods typically trade off the extent of netting against preservation of counterparty exposure: central clearing reallocates exposure to a central counterparty, while trade compression may alter bilateral counterparty relationships. TradeMech is a mechanism for markets in which one or two homogeneous fungible objects are traded. The mechanism transforms a network of initial bilateral contracts into chains and cycles, nets the designated object multilaterally on those chains and cycles, and replaces initial contracts with multiparty contracts whose assigned trades remain fractions of the original bilateral trades. The construction achieves maximal multilateral netting of the designated object while preserving each agent's contractual profit and preserving the location of counterparty risk. When a party fails to pre-commit a required object, the affected assigned trade is recovered as a bilateral contract between the same original counterparties and the remaining assigned trades are re-netted on residual chains, so no new counterparty exposure is created.

q-fin.TR↗

arXiv2026

A Model and Estimation of the Bitcoin Transaction Fee

Bitcoin transaction fees will become more important as the block subsidy declines, but fee formation is hard to study with blockchain data alone because the relevant queueing environment is unobserved. We develop and estimate a structural model of Bitcoin fee choice that treats the mempool as a market for scarce blockspace. We assemble a novel, high-frequency mempool panel, from a self-run Bitcoin node that records transaction arrivals, exits, block inclusion, fee-bumping events, and congestion snapshots. We characterize the fee market as a Vickery-Clarke-Groves mechanism and derive an equation to estimate fees. In the first-stage we estimate a monotone delay technology linking fee-rate priority and network state to expected confirmation delay. We then estimate how fees respond to that delay technology and to transaction characteristics. We find that congestion is the main determinant of delay; that the marginal value of priority is priced in fees, which is increasing in the gradient of confirmation time reduction per movement up in the fee queue; and that transactor choice of RBF, CPFP, and block conditions have economically important effects on fees.

cs.CE↗

arXiv2026

The Hidden Plumbing of Stablecoins: Financial and Technological Risks in the GENIUS Act Era

U.S. dollar stablecoins are increasingly used as payment and settlement instruments beyond cryptocurrency markets. With the enactment of the GENIUS Act in 2025, the United States established the first comprehensive federal framework governing their issuance, backing, and supervision. This paper evaluates the financial, technological, and regulatory risks that may arise as GENIUS-compliant stablecoins scale into mainstream use. We show that maintaining par-value redemption may depend not only on backing-asset quality, but also on the functioning of Treasury and repo markets, the balance-sheet capacity of broker-dealers, and the operational reliability of blockchain-based transaction rails. Even conservatively backed stablecoins can face stress from redemption surges, market-intermediation bottlenecks, or technological disruptions. We argue that durable stability will likely require an integrated approach spanning financial-market infrastructure, prudential regulation, and software governance. While grounded in U.S.\ law, the analysis identifies principles that are relevant for regulators in other jurisdictions developing stablecoin regimes.

econ.GN↗

arXiv2025

A Smart-Contract to Resolve Multiple Equilibrium in Intermediated Trade

We construct an empirically founded model of a repo trade intermediated by two broker-dealers and prove multiple equilibrium and the existence of equilibrium at the joint profit maximizing volume of trade. We then present a smart contract that resolves multiple equilibrium by requiring each broker-dealer to report its client schedule and its minimum hurdle spread, and implementing a selection rule that filters out hurdle-infeasible outcomes. Whenever there exists an equilibrium that exceeds both hurdle spreads, the protocol selects the joint profit maximizing feasible trade and thereby avoids a collapse to no trade. The smart contract is a machine executed algorithm which eliminates the need for trust. Hardware and cryptography are used to prevent leakage of broker-dealer client trade schedules, and to enable privacy-protected auditing with zero-knowledge proofs of the integrity of computations. The outcome can be implemented by a myopic strategy where a broker-dealer truthfully reports its own variables without anticipating its counterparty's reports. This minimizes cognitive and computational complexity, thereby making our smart contract suitable for real-world deployment.

econ.TH↗

arXiv2024

Targeted Nakamoto: A Bitcoin Protocol to Balance Network Security and Carbon Emissions

In a Proof-of-Work blockchain such as Bitcoin mining hashrate is increasing in the block reward. An increase in hashrate reduces network vulnerability to attack (a reduction in security cost) while increasing carbon emissions and electricity cost (an increase in externalities cost). This implies a tradeoff in total cost at different levels of hashrate and the existence of a hashrate interval where total cost is minimized. Targeted Nakamoto is a Proof-of-Work protocol augmentation that incentivizes miners to hone in on a target hashrate interval. When hashrate is above target a ceiling is placed on the block reward a miner can receive. When hashrate is below target a floor is placed underneath the miner's block reward. Monetary neutrality is maintained by a proportional increase in spending potential among addresses holding UTXO's to match a deduction from total block reward when the ceiling is operative and a proportional reduction in spending potential among addresses holding UTXO's to match an increase over the total block reward when the floor is binding.

cs.CR↗

arXiv2023

ADESS: A Proof-of-Work Protocol to Deter Double-Spend Attacks

A principal vulnerability of a proof-of-work ("PoW") blockchain is that an attacker can re-write the history of transactions by forking a previously published block and build a new chain segment containing a different sequence of transactions. If the attacker's chain has the most cumulative mining puzzle difficulty, nodes will recognize it as canonical. We propose a modification to PoW protocols, called ADESS, that contains two novel features. The first modification enables a node to identify the attacker chain by comparing the temporal sequence of blocks on competing chains. The second modification penalizes the attacker by requiring it to apply exponentially increasing hashrate in order to make its chain canonical. We demonstrate two things; (i) the expected cost of carrying out a double-spend attack is weakly higher under ADESS compared to the current PoW protocols and (ii) for any value of transaction, there is a penalty setting in ADESS that renders the expected profit of a double-spend attack negative.

cs.CR↗