Keywords: blockchain, privacy, Bitcoin
A blockchain allows participants in a decentralized network to agree, at regular intervals, about the true state of shared data. Such shared data can represent balances and trades of digital currency (as in Bitcoin), but also of more complex types of digital assets and changes to digital attributes, making blockchain a general purpose technology with potential applications across industry verticals. From a market design perspective, two key dimensions of a blockchain-based digital platform are the degree of transparency of the transactions taking place through it, and the related degree of privacy it offers to its users. The resulting marketplaces are characterized by increased competition, lower barriers to entry and innovation, lower privacy and censorship risk, and allow participants within the same ecosystem to make investments to support and operate shared infrastructure without assigning market power and visibility over all transactions to a single platform operator. At the same time, they also introduce significant, new challenges in terms of scalability and security, and often require a change in the underlying business model and incentives.