Digital currencies store balances in anonymous electronic addresses. We analyze the tradeoffs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model, agents balance the risk of theft of a large account with the cost to safeguarding a...

We use a simple model to study whether private payment systems based on bank deposits can provide the optimal level of safety. In the model, bank deposits backed by projects are subject to default risk that can be mitigated by a depositor's ex ante and ex post monitoring. Safe payment...