IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v263y2026ics0165176526001345.html

Sunk capital and repeated interaction in Nakamoto consensus

Author

Listed:
  • Wright, Craig S.

Abstract

Budish (2025) shows that the flow cost of Nakamoto-style trust scales linearly with the value secured, relying on a one-shot, free-entry formulation in which interaction is memoryless. The Nakamoto protocol violates the memoryless property through two hardcoded temporal structures: a 100-block coinbase maturity rule and a 2016-block difficulty adjustment. Both make future payoffs history-dependent. Jointly with sunk capital and pseudonymity, these features introduce continuation values, asymmetric attack costs, and Beckerian deterrence—forces the model eliminates by construction. The three assumptions analysed here are central to the model’s application to proof-of-work systems as they exist.

Suggested Citation

  • Wright, Craig S., 2026. "Sunk capital and repeated interaction in Nakamoto consensus," Economics Letters, Elsevier, vol. 263(C).
    • Handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s0165176526001345
    DOI: 10.1016/j.econlet.2026.112940
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176526001345
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2026.112940?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s0165176526001345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.