William Cong

Cornell University
Ithaca, NY 14853

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Institutional Affiliation: Cornell University

NBER Working Papers and Publications

February 2019Decentralized Mining in Centralized Pools
with Zhiguo He, Jiasun Li: w25592
The rise of centralized mining pools for risk sharing does not necessarily undermine the decentralization required for permissionless blockchains: Each individual miner's cross-pool diversification and endogenous fees charged by pools generally sustain decentralization, because larger pools better internalize their externality on global hash rates, charge higher fees, attract disproportionately fewer miners, and thus grow more slowly. Instead, mining pools as a financial innovation escalate the arms race among competing miners and thus significantly increase the energy consumption of proof-of-work-based consensus mechanisms. Empirical evidence from Bitcoin mining supports our model predictions. The economic insights inform many other blockchain protocols as well as the industrial organizat...
May 2018IPO Intervention and Innovation: Evidence from China
with Sabrina T. Howell: w24657
This paper asks whether restricting timely access to public equity markets affects innovation among firms that intend to go public. The Chinese government has suspended IPOs occasionally, exposing firms to indeterminate listing delays, which curtails timely access to equity capital and increases uncertainty. We find that suspension-induced delay substantially reduces innovation, measured using patenting activity. These effects begin during the delay period and endure for multiple years, while impacts on other firm outcomes are short-lived. Our results suggest that corporate innovation is cumulative, and that predictable, well-functioning IPO markets are important for firm value creation through innovation.
March 2018Blockchain Disruption and Smart Contracts
with Zhiguo He: w24399
Blockchain technology provides decentralized consensus and potentially enlarges the contracting space using smart contracts with tamper-proofness and algorithmic executions. Meanwhile, generating decentralized consensus entails distributing information which necessarily alters the informational environment. We analyze how decentralization affects consensus effectiveness, and how the quintessential features of blockchain reshape industrial organization and the landscape of competition. Smart contracts can mitigate informational asymmetry and improve welfare and consumer surplus through enhanced entry and competition, yet the irreducible distribution of information during consensus generation may encourage greater collusion. In general, blockchains can sustain market equilibria with a wider ...

Published: Lin William Cong & Zhiguo He, 2019. "Blockchain Disruption and Smart Contracts," The Review of Financial Studies, vol 32(5), pages 1754-1797.

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