YACL Talk | Feb 06, 11:00am | Hanna Halaburda, NYU Stern - On the Impossibility of Transparent and Decentralized DeFi Trading

[Aviv Yaish]

I highly encourage everyone to join next week's talk, Hanna does really cool work.

Details:

- Speaker: Hanna Halaburda (NYU Stern)

- Location: AKW200. Time: February 6, 2026, 11am ET

- Title: On the Impossibility of Transparent and Decentralized DeFi Trading (livestream, paper)

- Abstract: Permissionless blockchains promise to eliminate intermediaries by combining open participation, transparent execution, and contestable control. Control over transaction execution has nonetheless become increasingly concentrated on permissionless blockchains. In blockchains that support decentralized finance (DeFi), this concentration is economically consequential because transaction ordering directly affects trading payoffs. A small number of block producers determine transaction ordering and capture a large share of trading-related surplus, and this pattern deepens precisely as access expands and protocols adopt designs intended to make execution more competitive. This  outcome is not an accident of implementation or a failure of protocol design. We show that permissionless blockchains with DeFi activity endogenously centralize execution, despite transparency and regardless of protocol design. We develop a protocol-agnostic model of competition for transaction execution in which block producers---miners, validators, or builders---compete for control over block construction. When transaction ordering affects trading payoffs, execution generates extractable ordering rents. Heterogeneity in block producers' ability to capture these rents implies heterogeneous effective rewards from execution. In equilibrium, contest-based selection sorts and amplifies these differences: block producers for whom execution is more valuable exert more effort (mining, staking or bidding), win execution more often, and become more reliable executors. Traders respond by routing transactions toward the most reliable block producers, generating coordination externalities that further concentrate execution. More decisive execution contests amplify these forces. Together, the analysis yields an impossibility result: under permissionless entry with DeFi activity, decentralized execution arises only under knife-edge conditions and is unstable to small perturbations. The findings highlight structural limits to decentralized execution in DeFi that are independent of specific protocol design choices.
- Bio: Hanna Halaburda joined New York University Stern School of Business as an Associate Professor of Technology, Operations and Statistics in September 2019. In her research, Professor Halaburda studies how technology changes economic forces and thus affects business models and interactions in the marketplace. One strand of her work focuses on competition between digital platforms. Since 2011, she has built a research program in digital currencies and blockchain technologies, including analyses of incentives in consensus protocols, cryptocurrency adoption, smart contracts, and token issuance. Professor Halaburda’s work has been published in Management Science, RAND, American Economic Journal, Games and Economic Behavior, and other academic journals. In 2015 she co-authored Beyond Bitcoin: The Economics of Digital Currency, the first book analyzing digital currencies from the economic perspective. The book’s 2nd edition, co-authored with Miklos Sarvary and Guillaume Haeringer, was published by Palgrave Macmillan in 2022. Prior to joining NYU Stern, Professor Halaburda was an Assistant Professor at Harvard Business School, and a senior economist at the Bank of Canada. She holds Master’s degrees in Economics from the Warsaw School of Economics and in Philosophy from Warsaw University, and a PhD in Economics from Northwestern University.

[Aviv Yaish]

Hi all, due to unforeseen circumstances Hanna won't present next week. Instead, we're proud to have Harjasleen Malvai (UIUC) present her job talk!

See additional details in: https://sites.google.com/view/yacl/seminar