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Ransomware activity and blockchain congestion

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  • Sokolov, Konstantin

Abstract

I examine blockchain congestion episodes caused by more than 4,400 triggers for ransomware attacks over a two-year period. When demand for settlement exceeds blockchain capacity, blockchain users engage in fee competition to prioritize their transaction settlement. A typical surge in ransomware activity causes transaction fees to increase by 2.1% and up to 28% in extreme cases. Consistent with theory literature, some users forgo blockchain settlement when transaction fees increase. An event study around an extreme spike in ransomware activity supports the findings of the main analysis.

Suggested Citation

  • Sokolov, Konstantin, 2021. "Ransomware activity and blockchain congestion," Journal of Financial Economics, Elsevier, vol. 141(2), pages 771-782.
    • Handle: RePEc:eee:jfinec:v:141:y:2021:i:2:p:771-782
    DOI: 10.1016/j.jfineco.2021.04.015
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lars Hornuf & Paul P. Momtaz & Rachel J. Nam & Ye Yuan, 2023. "Cybercrime on the Ethereum Blockchain," CESifo Working Paper Series 10598, CESifo.
    2. Yulin Liu & Yuxuan Lu & Kartik Nayak & Fan Zhang & Luyao Zhang & Yinhong Zhao, 2022. "Empirical Analysis of EIP-1559: Transaction Fees, Waiting Time, and Consensus Security," Papers 2201.05574, arXiv.org, revised Apr 2023.
    3. Foley, Sean & Frijns, Bart & Garel, Alexandre & Roh, Tai-Yong, 2022. "Who buys Bitcoin? The cultural determinants of Bitcoin activity," International Review of Financial Analysis, Elsevier, vol. 84(C).
    4. Cole, Benjamin M. & Dyhrberg, Anne H. & Foley, Sean & Svec, Jiri, 2022. "Can Bitcoin be Trusted? Quantifying the economic value of blockchain transactions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    5. Dan Amiram & Bjørn N. Jørgensen & Daniel Rabetti, 2022. "Coins for Bombs: The Predictive Ability of On‐Chain Transfers for Terrorist Attacks," Journal of Accounting Research, Wiley Blackwell, vol. 60(2), pages 427-466, May.
    6. Feng, Wenjun & Zhang, Zhengjun, 2023. "Risk-weighted cryptocurrency indices," Finance Research Letters, Elsevier, vol. 51(C).
    7. Aspris, Angelo & Foley, Sean & Svec, Jiri & Wang, Leqi, 2021. "Decentralized exchanges: The “wild west” of cryptocurrency trading," International Review of Financial Analysis, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Blockchain; Congestion; Ransomware; Transaction fees;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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