Can Markets Be Too Frictionless? Tobin Taxes, Grossman-Stiglitz Information Paradoxes, Budish-Cramton-Shim Frequent Batch Auctions, Bank Run Velocity, and DeFi MEV

Deep End Era. Engineering with Sankalp · Oct 29, 2026 · 1h 3m

Every instinct of modern technology and textbook economics says that faster, cheaper, more instantaneous trading is always better. Why, then, did cutting exchange latency from milliseconds to nanoseconds trigger a wasteful billions-of-dollars sniping arms race that widened spreads for pension funds? Why did frictionless one-tap mobile banking turn a balance-sheet duration mismatch at Silicon Valley Bank into a forty-two-billion-dollar run in a single afternoon? And why do decentralized blockchains suffer hundreds of millions of dollars in "sandwich attack" extraction precisely because mempool…