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Finite blockchain games


Ewerhart, Christian (2020). Finite blockchain games. Economics Letters, 197:109614.

Abstract

This paper studies the dynamic construction of a blockchain by competitive miners. In contrast to the literature, we assume a finite time horizon. Moreover, miners are rewarded for blocks that eventually become part of the longest chain. It is shown that popular mining strategies such as adherence to conservative mining or to the longest-chain rule constitute pure-strategy Nash equilibria. However, these equilibria are not subgame perfect.

Abstract

This paper studies the dynamic construction of a blockchain by competitive miners. In contrast to the literature, we assume a finite time horizon. Moreover, miners are rewarded for blocks that eventually become part of the longest chain. It is shown that popular mining strategies such as adherence to conservative mining or to the longest-chain rule constitute pure-strategy Nash equilibria. However, these equilibria are not subgame perfect.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Economics and Econometrics, Finance, Blockchain, Proof-of-work, Nash equilibrium, Subgame perfection, Selfish mining
Language:English
Date:1 December 2020
Deposited On:23 Oct 2020 14:36
Last Modified:29 Oct 2020 02:08
Publisher:Elsevier
ISSN:0165-1765
Additional Information:Also published as Working Paper No. 355, Department of Economics, University of Zurich, see https://doi.org/10.5167/uzh-188648.
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.econlet.2020.109614

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