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The economics that keeps public blockchains running may also be what prevents them from becoming a single, widely shared “money network,” according to a new BIS Working Paper by Hyun Song Shin. The paper argues that validator incentives require congestion rents, and that congestion pushes users to cheaper chains—creating permanent fragmentation across blockchains and stablecoins.
In plain terms: blockchains don’t naturally converge to one “best” network. They splinter—because the fee model that pays validators also prices out lower-value users.
Why the BIS says congestion is “a feature, not a bug”
The paper’s core mechanism is simple. Public blockchains rely on validators to maintain consensus, and validators need to be rewarded. Those rewards ultimately come from users through fees (gas)—especially when block space is scarce. The BIS frames that scarcity as intentional: capacity constraints help generate the fee stream that sustains validator participation and governance.
When activity spikes, fees spike. That doesn’t just reflect demand; it’s part of the system’s incentive design. But it also drives away smaller or routine users.
How high fees create a multi-chain world
Once fees rise, users who don’t need maximum security (or can’t afford it) migrate to cheaper networks. New chains with less stringent consensus thresholds attract those users by offering low fees and high throughput. The outcome is a “sorting” effect: high-value and security-sensitive activity stays on expensive, more secure chains, while cost-sensitive activity moves elsewhere.
The BIS points to the real-world pattern: Ethereum’s congestion episodes coincided with users shifting activity to competing chains. It lists Solana, Tron, and others as examples of chains carving out different niches rather than one chain dominating everything.
Stablecoins don’t fix fragmentation — they inherit it
The paper argues stablecoins “inherit” blockchain fragmentation because stablecoins live on specific chains. Even if the issuer is the same, a stablecoin on one chain is not natively interchangeable with the same stablecoin on another chain without a bridge.
The BIS highlights two consequences:
- Liquidity splits into chain-specific pools (the same stablecoin becomes “different instruments” in practice across different ledgers).
- Cross-chain bridges add friction and risk, with the paper citing large cumulative losses from bridge exploits as one illustration of the added attack surface.
- The broader claim is blunt: stablecoin regulation can improve backing and disclosures, but it doesn’t solve the “rails problem” if the underlying infrastructure remains fragmented.
The policy message: architecture matters
The BIS concludes that the design of the future monetary system can’t be left entirely to market forces because decentralised systems are structurally predisposed to fragmentation. It explicitly frames this as a policy choice about digital currency infrastructure and the role of central banks as trust anchors.
Why it matters for crypto
- If congestion is structural, “cheap fees forever” usually means weaker coordination thresholds somewhere in the stack.
- Stablecoins may scale in volume while still operating as separate silos across chains, limiting true money-like network effects.
- Cross-chain bridges remain a key systemic risk point, because they’re the main workaround for non-interoperable stablecoins.
- The paper strengthens the argument that payments-grade rails may need stronger coordination anchors than public chain tokenomics naturally provide.
What to watch next
- Whether major stablecoin issuers push harder for native interoperability solutions that reduce reliance on bridges.
- How institutions continue to segment by chain (eg, Ethereum for high-value settlement, Tron/Solana for low-cost transfers) and what that does to liquidity.
- Policy follow-through: how central banks and regulators respond to the “rails matter more than issuer rules” claim in stablecoin debates.