Open Problems
Each of the ten parts leaves one question unresolved. These mark the book's boundary — and the starting line for the next round of research and engineering. If one of them is your question, come be the person who answers it.
- Part I: Foundation
Given that “conditional permissionlessness” constitutes the realistic end state of on-chain finance, to what extent can zero-knowledge compliance credentials preserve the freedoms of a permissionless architecture—and its trust-tax compression gains—within the constraints of sovereign compliance?
The chapter argues that no major state will cede financial jurisdiction, rendering fully permissionless global finance politically infeasible. The book positions zero-knowledge compliance credentials only as a technical exploration for maximizing freedom within the sovereign boundary, leaving its attainable limit to Chapter 30 and future practice.
From Ch. 3 · The Distinctive Value of Digital Assets and the Future of Finance → - Part II: Ecosystem
In on-chain perpetual futures markets that combine fully transparent order books with 50x–100x leverage, can selective opacity—zero-knowledge designs that remain verifiable without exposing liquidation thresholds—resolve the trilemma among transparency, leverage, and security without sacrificing verifiability?
The chapter explicitly lists this trilemma as an open problem that will define the next generation of market structure: three strategic attacks on Hyperliquid in 2025 showed that full transparency enables precise liquidation sniping, and the book identifies selective opacity only as a potential path whose mechanism design and effectiveness remain untested.
From Ch. 6 · The Evolution and Trade-offs of Perpetual Futures Market Structure → - Part III: Microstructure
Does the Hyperliquid-style liquidity flywheel possess a critical threshold of TVL or trading volume below which its positive feedback loop tips into irreversible self-unraveling?
The chapter shows that positive feedback loops are inherently symmetric between self-reinforcement and self-unraveling: the roughly 15% vault AUM drawdown and subsequent recovery after the JELLY incident suggest the flywheel still runs above critical mass, yet the safety margin cannot be determined a priori, and the book explicitly leaves the existence of such a threshold as an important question awaiting empirical testing.
From Ch. 9 · Hyperliquid's Microstructure Innovations → - Part IV: Pricing Mechanisms
Should a derivatives protocol whose core narrative rests on decentralization and “code is law” possess an emergency centralized “circuit breaker” against attacks capable of destroying it—and if so, who should hold it, under what trigger conditions, and how can its abuse be prevented?
The JELLY incident demonstrated that no pre-designed rule system can exhaust all malicious attack vectors, so the system ultimately relies on a discretionary guarantor of last resort; the POPCAT incident further proved that fixes premised on economic rationality cannot eliminate this fragility. The book states that such governance questions cannot be solved by code, only constrained by institutions.
From Ch. 12 · The Political Economy of Insurance Funds → - Part V: Information & Efficiency
With the explosive growth of on-chain perpetual futures volume since the second half of 2024, is the leadership of price discovery in crypto markets shifting from centralized exchanges to decentralized perpetual futures venues—that is, has the direction of information flow between CEXs and DEXs begun to reverse?
The chapter notes that empirical findings of CEX-dominated price discovery rest mainly on the period before DEX perpetual futures reached scale, while structural differences between on-chain and off-chain venues in oracle update frequency and liquidation efficiency create new arbitrage room. The book explicitly flags this question as a frontier topic for market-efficiency research in the regulated era.
From Ch. 15 · Informational Efficiency in Digital Asset Markets → - Part VI: Arbitrage & Anomalies
How will the “dual-track pricing” between the regulated CME/ETF complex and the offshore perpetual futures system evolve under the institutional segmentation of regulatory frameworks, trading sessions, settlement currencies, and settlement cycles, and to what extent can cross-system arbitrage close this pricing divide?
The book shows that after U.S. spot Bitcoin ETFs were approved in 2024, fundamental differences in regulation, trading hours, and settlement arrangements between the two systems form an institutional obstacle to cross-system arbitrage, so the same underlying asset frequently receives inconsistent pricing signals; it explicitly flags the evolution of this fissure, which did not exist before 2024, as a core topic of market-structure research in the coming years.
From Ch. 18 · Arbitrage Failure and Market Anomalies → - Part VII: Liquidity
Can the “floor liquidity” provided by protocol vaults absorb concentrated selling pressure and reduce independent market makers’ one-sided inventory risk, thereby inducing them to stay in the market during extreme conditions and enhancing the stability of the overall market microstructure at the macro level?
The chapter’s single-agent profit-and-loss simulation can only establish that independent market makers tend to retreat in an extreme crisis; the positive interaction whereby vault floor liquidity improves makers’ survival environment and induces them to stay remains an unproven theoretical inference, whose testing would require multi-agent simulations or empirical data that incorporate the interaction between vaults and independent market makers.
From Ch. 21 · The Public-Goods Dilemma and Incentive Design of Liquidity Governance → - Part VIII: Volatility
When market participants’ volatility-forecasting models and risk-control triggers are highly homogeneous, can heterogenization mechanisms be designed that preserve the effectiveness of individual risk management while structurally breaking the positive feedback loop of “model warning — synchronized withdrawal — liquidity dry-up — volatility spike”?
The chapter proposes mitigation at the individual, market, and protocol levels (such as asynchronous liquidation triggers) but concedes these measures cannot fully eliminate model-homogeneity risk; it cites the October 2025 cascade of roughly $19 billion in notional liquidations within about 36 hours as an empirical warning, and notes that as AI agents built on similar architectures and training data proliferate, an “algorithmic monoculture” could push synchronization risk to an unprecedented magnitude.
From Ch. 24 · Volatility Forecasting and Decision-Making → - Part IX: Engineering
Given that financial regulators worldwide currently lack the technical capacity to audit smart-contract code, how should the paradigm shift from auditing institutional behavior to auditing system architecture be underpinned by certified auditing standards and auditor-accountability mechanisms, so that embedded compliance does not degenerate into another form of “compliance theater”?
The book argues that embedded compliance presupposes regulators who can independently verify that contract code truly implements the compliance constraints it claims — a capacity that at present barely exists anywhere in the global regulatory system; it lists certified smart-contract auditing standards and a tiered certification and accountability mechanism for auditing firms as two pieces of infrastructure yet to be built.
From Ch. 30 · Embedded Compliance and Automated Governance → - Part X: The Future
In a permissionless on-chain financial network without a sovereign-credit backstop, how should the final recovery and resolution line of defense be designed when an extreme event breaches all clearing mechanisms within the system and the bankruptcy shortfall cannot be covered — an optimal auto-deleveraging mechanism, a system debt token, or some yet-to-be-invented socialized loss-mutualization protocol?
The book ranks this among the most pressing unsolved problems in financial engineering and system design: in traditional central-counterparty clearing the ultimate backstop is external public credit from the central bank or the sovereign state, whereas a decentralized, permissionless on-chain system has no such external backstop, leaving the ultimate risk buffer beyond the default waterfall an open gap.
From Ch. 33 · Summary and Research Outlook →