{"paper":{"title":"The Viability of Blockchain Markets under Discrete Clearing and Paid Priority","license":"http://creativecommons.org/licenses/by/4.0/","headline":"Blockchain markets with discrete clearing and paid priority undermine their own viability by selecting only high-valuation traders.","cross_cats":["econ.GN","q-fin.EC","q-fin.TR"],"primary_cat":"q-fin.GN","authors_text":"Agostino Capponi, \\'Alvaro Cartea, Fay\\c{c}al Drissi","submitted_at":"2026-05-17T12:39:46Z","abstract_excerpt":"This paper develops a model to evaluate the viability of blockchain markets as the sole venue for price formation. Blockchains clear at discrete intervals called block time, and transactions are executed sequentially according to priority fees paid by traders who compete for queue position. We show that these features undermine the viability of markets. Paid-priority ordering induces endogenous selection, where only traders with sufficiently high valuations participate. The participation cutoff rises with competition, which intensifies with lower information costs or higher liquidity demand. T"},"claims":{"count":4,"items":[{"kind":"strongest_claim","text":"We show that these features undermine the viability of markets. Paid-priority ordering induces endogenous selection, where only traders with sufficiently high valuations participate. The participation cutoff rises with competition, which intensifies with lower information costs or higher liquidity demand. This hinders price discovery and biases prices. It also impairs liquidity: the cutoff concentrates trading among aggressive traders and increases adverse selection that liquidity suppliers absorb in a single clearing round. Although longer block times enhance consensus security, they amplify these effects and can cause markets to shut down.","source":"verdict.strongest_claim","status":"machine_extracted","claim_id":"C1","attestation":"unclaimed"},{"kind":"weakest_assumption","text":"The model premise that traders rationally compare their private valuations against the expected priority fees and information costs to decide participation, producing a rising cutoff as competition intensifies (abstract description of endogenous selection mechanism).","source":"verdict.weakest_assumption","status":"machine_extracted","claim_id":"C2","attestation":"unclaimed"},{"kind":"one_line_summary","text":"Blockchain markets with discrete clearing and paid priority fees experience endogenous trader selection that biases prices, impairs liquidity, and risks market shutdown as competition rises.","source":"verdict.one_line_summary","status":"machine_extracted","claim_id":"C3","attestation":"unclaimed"},{"kind":"headline","text":"Blockchain markets with discrete clearing and paid priority undermine their own viability by selecting only high-valuation traders.","source":"verdict.pith_extraction.headline","status":"machine_extracted","claim_id":"C4","attestation":"unclaimed"}],"snapshot_sha256":"2a1695e39bdb00131fbc8abf560e09547021e508c5b2f00ce2fe394da029511e"},"source":{"id":"2605.17425","kind":"arxiv","version":1},"verdict":{"id":"fa7d8722-c8ae-45db-8ae3-ae8d77da89da","model_set":{"reader":"grok-4.3"},"created_at":"2026-05-19T22:47:13.664256Z","strongest_claim":"We show that these features undermine the viability of markets. Paid-priority ordering induces endogenous selection, where only traders with sufficiently high valuations participate. The participation cutoff rises with competition, which intensifies with lower information costs or higher liquidity demand. This hinders price discovery and biases prices. It also impairs liquidity: the cutoff concentrates trading among aggressive traders and increases adverse selection that liquidity suppliers absorb in a single clearing round. Although longer block times enhance consensus security, they amplify these effects and can cause markets to shut down.","one_line_summary":"Blockchain markets with discrete clearing and paid priority fees experience endogenous trader selection that biases prices, impairs liquidity, and risks market shutdown as competition rises.","pipeline_version":"pith-pipeline@v0.9.0","weakest_assumption":"The model premise that traders rationally compare their private valuations against the expected priority fees and information costs to decide participation, producing a rising cutoff as competition intensifies (abstract description of endogenous selection mechanism).","pith_extraction_headline":"Blockchain markets with discrete clearing and paid priority undermine their own viability by selecting only high-valuation traders."},"integrity":{"clean":true,"summary":{"advisory":0,"critical":0,"by_detector":{},"informational":0},"endpoint":"/pith/2605.17425/integrity.json","findings":[],"available":true,"detectors_run":[{"name":"doi_title_agreement","ran_at":"2026-05-19T23:01:19.613060Z","status":"completed","version":"1.0.0","findings_count":0},{"name":"doi_compliance","ran_at":"2026-05-19T22:52:05.104338Z","status":"completed","version":"1.0.0","findings_count":0},{"name":"claim_evidence","ran_at":"2026-05-19T21:41:57.734696Z","status":"completed","version":"1.0.0","findings_count":0},{"name":"ai_meta_artifact","ran_at":"2026-05-19T21:33:23.681126Z","status":"skipped","version":"1.0.0","findings_count":0}],"snapshot_sha256":"5f7336f90125f2c162abee8e446c111f75dd5f6b0731668cf82f30c94d46a3f6"},"references":{"count":62,"sample":[{"doi":"","year":2021,"title":"Replicating market makers","work_id":"08538fd7-3f7f-44db-ae1a-855450303bd6","ref_index":1,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2021,"title":"Aoyagi, Jun, and Yuki Ito, 2021, Coexisting exchange platforms: Limit order books and automated market makers","work_id":"1d0e5b15-e3df-4751-930e-2f37f7089b6a","ref_index":2,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2022,"title":"Auer, Raphael, Jon Frost, Leonardo Gambacorta, Cyril Monnet, Tara Rice, and Hyun Song Shin, 2022, Central bank digital currencies: motives, economic implications, and the re- search frontier,Annual re","work_id":"a0f90175-7c82-46c4-a2ac-ce3dd8d16f5b","ref_index":3,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2020,"title":"Baldauf, Markus, and Joshua Mollner, 2020, High-frequency trading and market perfor- mance,The Journal of Finance75, 1495–1526","work_id":"bc893b23-9532-485e-bb29-952792705206","ref_index":4,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2021,"title":"Barbon, Andrea, and Angelo Ranaldo, 2021, On the quality of cryptocurrency markets: Centralized versus decentralized exchanges,arXiv preprint arXiv:2112.07386","work_id":"0af626b3-a838-450e-a1ff-e4552f92bf9b","ref_index":5,"cited_arxiv_id":"","is_internal_anchor":false}],"resolved_work":62,"snapshot_sha256":"aafbf0bb9773f3b1ca68605e4e5aff871e117235a026f032d76a595807e127ce","internal_anchors":0},"formal_canon":{"evidence_count":2,"snapshot_sha256":"3d36ce733e9dee05fa1732ed33932914dbe1b12592921c7fcbe3a0980eeb5991"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}