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Finite blockchain games

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  • Ewerhart, Christian

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.

Suggested Citation

  • Ewerhart, Christian, 2020. "Finite blockchain games," Economics Letters, Elsevier, vol. 197(C).
  • Handle: RePEc:eee:ecolet:v:197:y:2020:i:c:s0165176520303748
    DOI: 10.1016/j.econlet.2020.109614
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    References listed on IDEAS

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    1. Bruno Biais & Christophe Bisière & Matthieu Bouvard & Catherine Casamatta, 2019. "The Blockchain Folk Theorem," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1662-1715.
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    Cited by:

    1. Rico-Peña, Juan Jesús & Arguedas-Sanz, Raquel & López-Martin, Carmen, 2023. "Models used to characterise blockchain features. A systematic literature review and bibliometric analysis," Technovation, Elsevier, vol. 123(C).
    2. Barros, Fernando & Bertolai, Jefferson & Carrijo, Matheus, 2023. "Cryptocurrency is accounting coordination: Selfish mining and double spending in a simple mining game," Mathematical Social Sciences, Elsevier, vol. 123(C), pages 25-50.

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    More about this item

    Keywords

    Blockchain; Proof-of-work; Nash equilibrium; Subgame perfection; Selfish mining;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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