Related papers: Bitcoin: A Natural Oligopoly
Bitcoin mining presents a significant economic incentive for efficient hashing and broadcast of data, both parameters stemming from the Proofs of Work used to advance the network. This incentive has led to the development of Bitcoin…
We propose a mean field game model to study the question of how centralization of reward and computational power occur in Bitcoin-like cryptocurrencies. Miners compete against each other for mining rewards by increasing their computational…
Bitcoin is a "crypto currency", a decentralized electronic payment scheme based on cryptography which has recently gained excessive popularity. Scientific research on bitcoin is less abundant. A paper at Financial Cryptography 2012…
Proof of work cryptocurrencies began with the promise of a more egalitarian future with a decentralized monetary system with no powerful entities in charge. While this vision is far from realized, these cryptocurrencies are still touted to…
We develop a dynamic model of the Bitcoin market where users set fees themselves and miners decide whether to operate and whom to validate based on those fees. Our analysis reveals how, in equilibrium, users adjust their bids in response to…
Miners play a key role in cryptocurrencies such as Bitcoin: they invest substantial computational resources in processing transactions and minting new currency units. It is well known that an attacker controlling more than half of the…
All public blockchains are secured by a proof of opportunity cost among block producers. For example, the security offered by proof-of-work (PoW) systems, like Bitcoin, is due to spent computation; it is work precisely because it cannot be…
We model and analyze blockchain miners who seek to maximize the compound return of their mining businesses. The analysis of the optimal strategies finds a new equilibrium point among the miners and the mining pools, which predicts the…
Blockchain systems often employ proof-of-work consensus protocols to validate and add transactions into hashchains. These protocols stimulate competition among miners in solving cryptopuzzles (e.g. SHA-256 hash computation in Bitcoin) in…
Blockchain-based cryptocurrencies prioritize transactions based on their fees, creating a unique kind of fee market. Empirically, this market has failed to yield stable equilibria with predictable prices for desired levels of service. We…
The Bitcoin payment system involves two agent types: Users that transact with the currency and pay fees and miners in charge of authorizing transactions and securing the system in return for these fees. Two of Bitcoin's challenges are (i)…
The Bitcoin cryptocurrency records its transactions in a public log called the blockchain. Its security rests critically on the distributed protocol that maintains the blockchain, run by participants called miners. Conventional wisdom…
In cryptocurrencies, the block reward is meant to serve as the incentive mechanism for miners to commit resources to create blocks and in effect secure the system. Existing systems primarily divide the reward in proportion to expended…
Mining processes of Bitcoin and similar cryptocurrencies are currently incentivized with voluntary transaction fees and fixed block rewards which will halve gradually to zero. In the setting where optional and arbitrary transaction fee…
Blockchain is a technology that provides a distributed ledger that stores previous records while maintaining consistency and security. Bitcoin is the first and largest decentralized electronic cryptographic system that uses blockchain…
Does the proof-of-work protocol serve its intended purpose of supporting decentralized cryptocurrency mining? To address this question, we develop a game-theoretical model where miners first invest in hardware to improve the efficiency of…
We model the ultimate price paid by users of a decentralized ledger as resulting from a two-stage game where Miners (/Proposers/etc.) first purchase blockspace via a Tullock contest, and then price that space to users. When analyzing our…
An open distributed system can be secured by requiring participants to present proof of work and rewarding them for participation. The Bitcoin digital currency introduced this mechanism, which is adopted by almost all contemporary digital…
Proof-of-work blockchains reward each miner for one completed block by an amount that is, in expectation, proportional to the number of hashes the miner contributed to the mining of the block. Is this proportional allocation rule optimal?…
A key component of security in decentralized blockchains is proof of opportunity cost among block producers. In the case of proof-of-work (PoW), currently used by the most prominent systems, the cost is due to spent computation. In this…