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Transition to proof-of-stake and informed trading

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  • Choi, Hyung-Eun

Abstract

Using the Ethereum Merge upgrade — a transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) — as a natural experiment, this study identifies a cooperation channel driven by informed PoS validators, in contrast to the energy-intensive competition among PoW miners. We document that PoS achieves more efficient consensus through shorter block times and higher transaction throughput, and find increased informed trading post-Merge. Our findings suggest that PoS achieves enhanced economic efficiency through informed validator cooperation and stake value maximization.

Suggested Citation

  • Choi, Hyung-Eun, 2025. "Transition to proof-of-stake and informed trading," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s154461232401599x
    DOI: 10.1016/j.frl.2024.106570
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    References listed on IDEAS

    as
    1. Lin William Cong & Zhiguo He & Jiasun Li & Wei Jiang, 2021. "Decentralized Mining in Centralized Pools [Concentrating on the fall of the labor share]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1191-1235.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Proof-of-Stake(poS); Proof-of-Work(poW); Ethereum merge; Probability of informed trading (PIN);
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • G00 - Financial Economics - - General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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