Paolo Tasca

• PhD, Business
• Economist at Deutsche Bundesbank

The report describes the ongoing innovations in the financial sector brought about by digital currencies from a multi-level perspective: systemic, technical, legal, and industrial. The report extensively covers the current trends in the domain, in order to give the reader a quantitative understanding of the potential opportunities and risks arising...

The ecosystem of digital assets continues to change exponentially. In post-COVID times, digital assets may be seen as a cheaper, more liquid, and transparent safe haven compared to that offered by more traditional asset types. Inclusion of new digital assets, especially cryptocurrencies, in portfolios of standard financial assets has been the subje...

Cryptocurrency investment is inherently difficult due to its shorter history compared to traditional assets, the need to integrate vast amounts of data from various modalities, and the requirement for complex reasoning. While deep learning approaches have been applied to address these challenges, their black-box nature raises concerns about trust a...

Blockchain wallets are essential interfaces for managing digital assets and authorising transactions within blockchain systems. However, typical blockchain wallets often encounter performance, privacy and cost issues when utilising multi-signature schemes and face security vulnerabilities with single-signature methods. Additionally, while granting...

The environmental impact of Bitcoin mining has become a significant concern, prompting several governments to consider or implement bans on cryptocurrency mining. However, these well-intentioned policies may lead to unintended consequences, notably the redirection of mining activities to regions with higher carbon intensities. This study aims to qu...

Fiat-pegged stablecoins are by nature exposed to spillover effects during market turmoil in Traditional Finance (TradFi). We observe a difference in TradFi market shocks impact between various stablecoins, in particular, USD Coin (USDC) and Tether USDT (USDT), the former with a higher reporting frequency and transparency than the latter. We investi...

During the last half century, the concept of shared ledger systems that offer a single source of truth has challenged traditional bookkeeping, leading to innovations such as the resource-event-agent (REA) accounting framework, triple-entry accounting (TEA), and blockchain. Despite these advancements, the historical development of shared ledger syst...

Distributed Ledger Technologies (DLTs) have rapidly evolved, necessitating comprehensive insights into their diverse components. However, a systematic literature review that emphasizes the Environmental, Sustainability, and Governance (ESG) components of DLT remains lacking. To bridge this gap, we selected 107 seed papers to build a citation networ...

In this chapter, it is argued that the blooming of the Internet of Value (IoV) is a necessary journey that we need to take in order to accommodate the unfolding of four long-term mega socio-techno trends: datafication, dematerialisation, platformisation, and social and resources value awareness. The risks of the IoV are also discussed.

Second generation consensus mechanisms, such as Proof-of-Stake, promise to provide more favourable energy consumption characteristics than those of their predecessors, such as Proof-of-Work. In this paper, we quantify and compare the energy demand of four archetypal modalities of second-generation systems: Algorand, Ethereum 2.0, Hedera Hashgraph,...

This book shows how blockchain technology can transform the Internet, connecting global businesses in disruptive ways. It offers a comprehensive and multi-faceted examination of the potential of distributed ledger technology (DLT) from a new perspective: as an enabler of the Internet of Value (IoV). The authors discuss applications of blockchain te...

Objective: to present the new approach to perform monetary transactions with digital currency. Methods: abstract-logical, analytical methods. Results: in recent years, electronic retail payment mechanisms, especially e-commerce and card payments at the point of sale, have increasingly replaced cash in many developed countries. As a result, societie...

Blockchain and general purpose distributed ledgers are foundational technologies which bring significant innovation in the infrastructures and other underpinnings of our socio-economic systems. These P2P technologies are able to securely diffuse information within and across networks, without need for trustees or central authorities to enforce cons...

In recent years, electronic retail payment mechanisms, especially e-commerce and card payments at the point of sale, have increasingly replaced cash in many developed countries. As a result, societies are losing a critical public retail payment option, and retail consumers are losing important rights associated with using cash. To address this conc...

In recent years, electronic retail payment mechanisms, especially e-commerce and card payments at the point of sale, have increasingly replaced cash in many developed countries. As a result, societies are losing a critical public retail payment option, and retail consumers are losing important rights associated with using cash. To address this conc...

In this research, the evolution of blockchain applied to supply chains has been mapped from the inception of the technology until June 2020, utilizing primarily public data sources. We have analyzed 271 blockchain projects on parameters such as their inception dates, types of blockchain, status, sectors applied to and type of organization that foun...

This study covers the evolutionary development of blockchain technologies over the last 11 years (2009–2019) and sheds lights on potential areas of innovation in heretofore unexplored sub-components. For this purpose, we collected and analyzed detailed data on 107 different blockchain technologies and studied their component-wise technological evol...

We propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both internet purchases and point-of-sale purchases that are required to be cashless. Our proposal introduces a government-backed, privately-operated digital currency infrastructure to ensure that ever...

Triple-entry accounting (TEA) is one of the novelest notions in the blockchain world. However, the lack of a consistent and comprehensive set of categories to give account of it impedes a proper apprehension of the concept, leading to contradictions and to overlooking its specificity. In order to clearly delineate the confines of TEA, we create a t...

In this research, the evolution of Distributed Ledger Technology (DLT) in supply chains has been mapped from the inception of the technology until June 2020, utilising primarily public data sources. Two hundred seventy-one blockchain projects operating in the supply chain have been analysed on parameters such as their inception dates, types of bloc...

The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalising the economy at the micro level as well as the macro level. In this informal analysis and design proposal, we describe how infrastructure for digital assets can serve as a useful monetary and fisc...

In recent years, the concept of shared ledger systems offering a single source of truth has begun to put traditional bookkeeping into question. To date, its historical development remains unclear and under-researched. This paper conducts a genealogical analysis of shared ledger systems from their early forms such as Resource-Event-Agent (REA) accou...

We propose a simple model to simulate an interaction between banks and a financial market. In our model, banks are exposed to two sources of risks: market risk from their investments in assets external to the banking system and credit risk from lending in the interbank market. By and large, both risks increase during severe financial turmoil. In th...

A comparative study across the most widely known blockchain technologies is conducted with a bottom-up approach. Blockchains are deconstructed into their building blocks. Each building block is then hierarchically classified into main and subcomponents. Then, varieties of the subcomponents are identified and compared. A taxonomy tree is used to sum...

Crypto assets can be classified into two main categories, according to their principal function: native coins and crypto tokens. Native coins, like Bitcoin, generally compete with the traditional forms of money providing both an alternative currency instrument and a payment infrastructure. Differently from native coins, crypto tokens are coins that...

Although the origin of insurance is shrouded in obscurity, it is commonly assumed that the adoption of insurance can be dated back to around the second millennium BC in China and Babylon, where people developed a mechanism to pay their creditor an additional fund in exchange for the lenders’ guarantee to cancel their loan in case a shipment was los...

Purpose In this paper, we gather together the minimum units of users' identity in the Bitcoin network (i.e., the individual Bitcoin addresses), and group them into representations of business entities, what we call “super clusters”. While these clusters can remain largely anonymous, we are able to ascribe many of them to particular business catego...

The recent credit crisis of 2007/08 has raised a debate about the so-called knife-edge properties of financial markets. The paper contributes to the debate shedding light on the controversial relation between risk-diversification and financial stability. We model a financial network where assets held by borrowers to meet their obligations, include...

This paper contributes to a growing literature on the ambiguous effects of risk diversification. In our model, banks hold claims on each other’s liabilities that are marked-to-market on the individual financial leverage of the obligor. The probability of systemic default is determined using a passage-problem approach in a network context and banks...

The emergence of crowdfunding has attracted attention from borrowers, investors, banks and regulators alike. This chapter reviews its historical development, distinguishes between different business models, and discusses its disruptive potential and future growth prospects. Focusing mainly on lending- and equitybased crowdfunding, it further presen...

We develop a model that captures, at the same time, the temporal dynamics of single-firm credit risk and the contagion across banks via a network of obligations and common assets. In particular, we enrich the continuous-time modelling approach of default by accounting explicitly for the procyclical loop between asset prices and leverage. Contagion...

In this paper, we gather together the minimum units of Bitcoin identity (the individual addresses), and group them into approximations of business entities, what we call “super clusters”. While these clusters can remain largely anonymous, we are able to ascribe many of them to particular business categories by analyzing some of their specific trans...

The notion of an entirely digital form of money has captured the curiosity of economists, computer scientists, and philosophers alike from the time the computer was still young. Both technologies had existed independently: cryptography, useful in encoding email messages, sensitive information and digital files; decentralized, distributed networks w...

This paper approaches the PPP puzzle by using the Bitcoin/US Dollar exchange rate. The use of the virtual currency as macroeconomic laboratory allows us to remove frictions that previously impeded the empirical demonstration of the law of one price. We show that price adjustments are still far from perfect due to information asymmetry between agent...

This paper provides a mapping from portfolio risk diversification into the pairwise cor-relation between portfolios. In a finite market of uncorrelated assets, portfolio risk is re-duced by increasing diversification. However, higher the diversification level, the greater is the overlap between portfolios. The overlap, in turn, leads to greater cor...

Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss a model in which these correla...

Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss a model in which these correla...

Use of network theory made possible to measure quantitatively many features of social and technological systems. In this spirit, inspired by traditional measures of centrality we introduce DebtRank a novel measure of systemic impact. We that we intend the risk of default of a large portion of the financial system, depends on the network of financia...

Systemic risk, here meant as the risk of default of a large portion of the financial system, depends on the network of financial exposures among institutions. However, there is no widely accepted methodology to determine the systemically important nodes in a network. To fill this gap, we introduce, DebtRank, a novel measure of systemic impact inspi...

DebtRank: Too Central to Fail? Financial Networks, the FED and the Global Systemic Risk. -- Supplementary Information --

We model the systemic risk associated with the so-called balance-sheet amplification mechanism in a system of banks with interlocked balance sheets and with positions in real-economy-related assets. Our modeling framework integrates a stochastic price dynamics with an active balance-sheet management aimed to maintain the Value-at-Risk at a target l...

The recent credit crisis of 2007/08 has raised a debate about the so-called knife-edge properties of financial markets. The paper contributes to the debate shedding light on the controversial relation between risk-diversification and financial stability. We model a financial network where assets held by borrowers to meet their obligations, include...