This study provides descriptive evidence on the determinants and consequences of voluntary smart contract audits in decentralized finance (DeFi). Two types of auditors operate in the DeFi market: centralized auditors, who are hired on a fixed-fee basis, and decentralized auditors, often referred to as bounty hunters, who are compensated based on the vulnerabilities they identify. Our analysis draws on a dataset of thousands of centralized audit reports and hundreds of bounty programs linked to over 4,000 DeFi protocols launched between 2020 and 2025. We find that pre-launch audit adoption is systematically related to protocol-level design choices, risk exposure, and code characteristics. However, having an audit at protocol launch is not significantly associated with post-launch breach probability or hack-related losses. Although decentralized audits generally are complementary to centralized ones, the two types tend to become substitutes following systemic security breaches, such as the PolyNetwork hack. In particular, there is a significantly increased demand for decentralized audits, but the tendency is reduced for protocols that previously hired a large auditor. Following protocol-level security breaches, compromised protocols often replace small auditors with large ones and hire decentralized auditors. In addition, auditors of hacked protocols incur short-term market losses that may be mitigated by effective crisis management. Overall, our findings suggest that large centralized and decentralized auditors contribute to trust and resilience in decentralized finance.

The 2016 Panama Papers leak tightened regulatory enforcement around money laundering and offshore banking. We investigate whether the diversion of foreign aid in developing countries led to a shift to cryptocurrency as an alternative laundering platform. We develop a disbursement-timed forensic measure of cryptocurrency activity, combining on-chain Bitcoin transactions and wallet creation, off-chain exchange records, and IP-linked web traffic, and apply it to World Bank aid disbursements covering $238 billion across the 93 recipient countries in our estimation sample during 2018-2024. Exploiting the administrative timing of aid tranche arrivals, we find sharp, short-lived surges of crypto activity at the disbursement month, driven mainly by anonymous and newly created wallets on both tax-haven and mainstream exchanges. Blockchain forensics reveal patterns consistent with the placement, layering, and integration sequence of conventional money laundering. We estimate an implied leakage of 2 to 6 cents per aid dollar, which amounts to roughly 1.7 to 4.4 billion dollars of aid diversion across the tranche arrivals we study. Capture carries no funding penalty: the four sectors where we detect it, Transport, Water and Sanitation, Social Protection, and Governance, still absorb half of subsequent World Bank funding. Cryptocurrency facilitates aid diversion, but its transparent ledgers also leave forensic traces that may help detect and recover diverted funds. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

We investigate how open-source code releases influence startup growth, focusing on the strategic trade-off between transparency-driven innovation and exposure to proprietary and cybersecurity risks. Using a novel dataset linking startups to GitHub activity, we find that open-sourcing significantly boosts user adoption and engagement. To address endogeneity, we implement a matched difference-indifferences design and use the staggered rollout of GitHub Copilot as an instrument. The results suggest a plausibly causal relation between open-source code releases and startup growth, particularly for protocols with decentralized governance, venture backing, high-quality codebases, and active developer communities. However, open-source code releases also carry risks: increased exposure to cyberattacks and competitive imitation. For example, after Uniswap's license expired, its market dominance fell by over 50% amid a surge in copycat platforms. Open-source startups are also more likely to suffer future security breaches than their closed-source counterparts. However, they develop more new features following code releases, as well as exhibit positive longrun returns, suggesting an alignment of the investor base with long-term value creation of open-source innovation. Our study highlights a trade-off that startups must navigate as they go beyond coding to signal credibility and build success in highly collaborative markets.

Tokenization of real-world assets (RWAs)—the representation of off-chain assets on a digital ledger—has gained momentum across money market funds, government bonds, gold, and private credit. It bridges traditional finance and on-chain markets while continuing to rely on traditional infrastructure for custody, legal enforcement, and price discovery. Tokenization promises efficiency gains in issuance, trading, and settlement and may facilitate secondary-market liquidity by making claims on otherwise illiquid assets more transferable. We distinguish three categories: tokenized liquid assets (e.g., gold and equities), money-like claims (e.g., stablecoins and tokenized deposits), and tokenized illiquid assets (e.g., loans and private credit). Tokenization of liquid assets integrates traditional markets with decentralized finance and reallocates liquidity across venues. Tokenization of illiquid assets, by contrast, facilitates secondary-market trading opportunities, but whether it creates meaningful liquidity depends on market design, investor participation, valuation quality, and asset opacity. This liquidity transformation inherits incentive problems familiar from banking and securitization while introducing new economic and operational risks related to custody, redemption design, and oracles. We argue that the trading speed of a tokenized claim should match the speed at which the underlying asset can be traded, valued, or redeemed—the speed-matching principle that organizes our policy framework. We propose a policy framework that ties regulatory requirements to the economic role tokens play and the speed and liquidity of their underlying markets rather than to the underlying technology, prioritizing clear legal foundations, credible redemption mechanisms, robust custody and audit standards, and sound oracle governance.

How competition affects manipulation by firms of information about important attributes of their products and how such information manipulation impacts firms’ short-term and long-term performance are open empirical questions. We use a setting that is especially suitable for answering these questions—centralized crypto exchanges, on which information manipulation takes the form of inflated trading volume. We find that static and dynamic competition measures are positively associated with volume inflation, indicating that competition may lead to increased information manipulation. Exchanges that manipulate volume obtain short-run benefits but are punished in the long run, consistent with the trade-off between short-lived increases in rents and future losses because of damaged reputation. This paper was accepted by Agostino Capponi, finance. Funding: The authors thank the Israel Science Foundation [Grant 2225/21], the Coller School of Management Blockchain Research Institute, the Henry Crown Institute for Business Research in Israel, and the Cornell Fintech Initiative for financial support. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.02903 .

Oracles are software components that enable data exchange between siloed blockchains and external environments, enhancing smart contract capabilities and platform interoperability. We find that oracle integration is positively associated with total value locked and platform/protocol valuation, triggered by positive network effects in adoption and usage. Our study reveals symbiotic gains from enhanced interoperability and network effects across protocols on a given chain and among integrated chains. Oracle integration improves risk-sharing and mitigates contagion, increasing resilience during turbulent periods in crypto markets. We draw parallels between oracle integration and international economics, offering insights for regulators, entrepreneurs, and practitioners in decentralized finance.

The advent of cryptocurrencies and digital assets holds the promise of improving financial systems by offering cheap, quick, and secure transfer of value. However, it also opens up new payment channels for cybercrimes. Assembling a diverse set of public on- and off-chain, proprietary, and hand-collected data, including attacker–victim negotiations and dark web conversations in Russian, we present an initial anatomy of crypto-enabled cybercrimes, highlighting relevant economic issues and proposing areas for future research. Among others, we find ransomware, as the most dominant organized crypto-enabled cybercrime, entails criminal gangs that operate like firms who adopt modern revenue models and carefully manage their reputations. We suggest that blanket restrictions on cryptocurrency usage may prove counterproductive. Instead, blockchain transparency enables effective forensics for tracking, monitoring, and shutting down dominant cybercriminal organizations, which potentially facilitates a more secure and reliable crypto ecosystem in the longer term. This paper was accepted by David Simchi-Levi, finance. Funding: This work was supported by the National University of Singapore (NUS), Ripple’s University Blockchain Research Initiative (UBRI), the Israel Science Foundation (ISF), and the Cornell FinTech Initiative. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.03691 .

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Over the last decade, the green shoots of a new economic order have emerged as decentralized technologies challenge traditional financial systems. Decentralized finance (DeFi) holds the potential to transform international business (IB) by offering accessible financial services across borders, disrupting traditional intermediaries, and promoting financial inclusion. While traditional fintech has challenged banks, DeFi operates outside legacy systems, leveraging blockchain technology and smart contracting to introduce a new range of products and services that provide first-movers with an upper hand to both expand their business across the globe as well realize cost savings on existing business. Despite offering advantages like efficiency, transparency, and security, DeFi faces regulatory uncertainties and scalability, adoption, and stability concerns. Our study explores how DeFi can seamlessly integrate into the IB space while addressing these challenges. In addition to offering insights for investors, multinational firms, and regulators, we also lay the groundwork for future IB research in the fintech domain. As the DeFi innovation unfolds, understanding and harnessing its potential can empower stakeholders to engage responsibly and effectively in this transformative landscape.

This article examines the multifaceted landscape of Initial Coin Offerings (ICOs), focusing on key determinants of ICO success and post-ICO performance, such as the credibility of the project team, prevailing market conditions, the regulatory environment, and the technological robustness of the project. Additionally, this study delves into the influence of token liquidity, governance structure, and regulatory considerations on post-ICO performance. The article also discusses the roles of ICO analysts and potential conflicts of interest arising from their involvement in the market. Finally, the article explores the prevalence and strategies of ICO scams, underscoring the importance of investor diligence and regulatory scrutiny.

The collapse of FTX has underscored the critical importance of auditing, especially in the fast-growing decentralized finance (DeFi) markets. Due to the decentralized nature of DeFi platforms, which facilitate peer-to-peer transactions without intermediaries, and the rapid pace of innovation in the unregulated and highly asymmetric information environment of the DeFi market, traditional financial auditing methods face significant hurdles. This study explores the relevance of auditing in DeFi protocols and highlights its critical role in ensuring transparency, security, and trust within these decentralized systems. Through a comprehensive analysis of the unique characteristics of DeFi, including smart contracts and blockchain technology, we delve into the specific challenges and risks associated with auditing DeFi applications. Furthermore, the article discusses the demand for robust auditing practices, regulatory oversight, and industry standards to enhance resilience and stability in this fast-growing emerging market.

We provide an overview of crypto-related scams, including investment scams, Ponzi schemes, and more recently, rug pulls that are commonly seen in Decentralized Finance (DeFi) projects. We then discuss data sources for studying Initial Coin Offering (ICO) scams, before examining the case of PlusToken, the largest crypto scam, AnubisDAO, the prototypical rug pull, and Luno's anti-scam initiative, a good prototype for other cryptocurrency exchanges and service entities to follow. User protection and education are crucial in preventing scams, despite the fact that they may require efforts from centralized entities and regulators.

We develop a model of voluntary disclosure where firm managers care about debtholders' payoff out of concerns for their reputation or lending relationship. We derive a novel double-threshold disclosure strategy under which a manager discloses sufficiently good or sufficiently bad news in the unique equilibrium. We bring the insights to data by assessing the Paycheck Protection Program (PPP) --- a financial rescue program designed to cover firms' payroll expenses during the Covid-19 pandemic. We document that the decision of managers whether to reveal the bailout loan details to the public dominates the disclosure strategy of firms that engage in relationship lending, especially for longer and more intense relationships. Examining potential economic channels, we find that such strategic disclosure is unlikely to be driven by habit formation or liquidation concerns. Instead, empirical evidence points to relationship capital considerations, where firms incur the costs of disclosing unfavorable news to reduce lenders' monitoring concerns in exchange for future lending benefits. Overall, the findings highlight a novel economic channel for releasing unfavorable information in which relationship lending has a disciplinary effect on firms' strategic disclosure, especially during times of crisis when debt monitoring becomes more relevant.

In response to the Joint Committee on Taxation's July 2023 request for comments on application of various Internal Revenue Code sections on digital assets, we propose a consistent set of rules to apply current law to digital assets. We highlight that the underlying economics and characteristics of transactions should be the primary concern for the application of rules and the valuation of digital assets. We believe any digital asset rules should (1) treat classes of digital assets with unique characteristics differently based on their economics, (2) minimize incentives for users to engage in tax-motivated structuring of transactions, and (3) allow the Internal Revenue Service authority to react to and regulate new classes of digital assets as they are created. We do not believe that the unique features of digital assets are a challenge to applying current law or warrant special tax preferred treatment.