Related papers: Dynamic User Competition and Miner Behavior in the…
Although Bitcoin was intended to be a decentralized digital currency, in practice, mining power is quite concentrated. This fact is a persistent source of concern for the Bitcoin community. We provide an explanation using a simple model to…
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 mining of bitcoin is modeled using system dynamics, showing that the past evolution of the network hash rate can be explained to a large extent by an efficient market hypothesis applied to the mining of blocks. The possibility of a…
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…
What happens to mining when the Bitcoin price changes, when there are mining supply shocks, the price of energy changes, or hardware technology evolves? We give precise answers based on the technical forces and incentives in the system. We…
In this paper we give an elementary analysis of economics of Bitcoin that combines the transaction demand by the consumers and the supply of hashrate by miners. We argue that the decreasing block reward will have no significant effect on…
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…
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…
In recent years, cryptocurrencies have attracted growing attention from both private investors and institutions. Among them, Bitcoin stands out for its impressive volatility and widespread influence. This paper explores the predictability…
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…
Selfish miners selectively withhold blocks to earn disproportionately high revenue. The vast majority of the selfish mining literature focuses exclusively on block rewards. Carlsten et al. [2016] is a notable exception, observing that…
Bitcoin transaction fees will become more important as the block subsidy declines, but fee formation is hard to study with blockchain data alone because the relevant queueing environment is unobserved. We develop and estimate a structural…
Bitcoin has witnessed a prevailing transition that employing transaction fees paid by users rather than subsidy assigned by the system as the main incentive for mining.
To maintain blockchain-based services with ensuring its security, it is an important issue how to decide a mining reward so that the number of miners participating in the mining increases. We propose a dynamical model of decision-making for…
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…
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…
Mobile data traffic has been steadily rising in the past years. This has generated a significant interest in the deployment of incentive mechanisms to reduce peak-time congestion. Typically, the design of these mechanisms requires…
Public blockchains implement a fee mechanism to allocate scarce computational resources across competing transactions. Most existing fee market designs utilize a joint, fungible unit of account (e.g., gas in Ethereum) to price otherwise…
We study the following problem that is motivated by Blockchains where ``miners'' are serially given the monopoly for assembling transactions into the next block. Our model has a single good that is sold repeatedly every day where new demand…