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The economic dependency of bitcoin security

Author

Listed:
  • Pavel Ciaian
  • d’Artis Kancs
  • Miroslava Rajcaniova

Abstract

We studied the extent to which bitcoin blockchain security permanently depends on the underlying distribution of cryptocurrency market outcomes using daily blockchain and bitcoin data for 2014–2019 and employing the autoregressive-distributed lag (ARDL) approach. We tested three equilibrium hypotheses: (i) sensitivity of the bitcoin blockchain to mining reward, (ii) security outcomes of the bitcoin blockchain and the proof-of-work cost, and (iii) the speed of adjustment of the bitcoin blockchain security to deviations from the equilibrium path. Our results suggest that bitcoin price and mining rewards were intrinsically linked to bitcoin security outcomes.The bitcoin blockchain security’s dependency on mining costs was geographically differenced – it was more significant for the global mining leader China than for other world regions. Bitcoin blockchain security tended to revert relatively fast to its equilibrium security level after the input or output of price shocks.

Suggested Citation

  • Pavel Ciaian & d’Artis Kancs & Miroslava Rajcaniova, 2021. "The economic dependency of bitcoin security," Applied Economics, Taylor & Francis Journals, vol. 53(49), pages 5738-5755, October.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:49:p:5738-5755
    DOI: 10.1080/00036846.2021.1931003
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    Cited by:

    1. Pavel Ciaian & d'Artis Kancs & Miroslava Rajcaniova, 2021. "Interdependencies between Mining Costs, Mining Rewards and Blockchain Security," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 25-62, May.
    2. Layla Hajr & Suzan Katamoura & Abdulrahman Mirza, 2023. "Bitcoin Cryptocurrency and Electronic Commerce in Saudi Arabia," SAGE Open, , vol. 13(4), pages 21582440231, December.
    3. Müser, Sinja & Hemmerich, Moritz & Schmitz, Florian, 2024. "Individual differences in Bitcoin investment: The role of personality, attitudes, and knowledge," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 113(C).
    4. Daehan Kim & Doojin Ryu & Robert I. Webb, 2024. "Does a higher hashrate strengthen Bitcoin network security?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-15, December.
    5. José Parra-Moyano & Gregor Reich & Karl Schmedders, 2024. "A Note on the Non-proportionality of Winning Probabilities in Bitcoin," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1697-1714, September.
    6. Simona-Vasilica Oprea & Irina Alexandra Georgescu & Adela Bâra, 2024. "Is Bitcoin ready to be a widespread payment method? Using price volatility and setting strategies for merchants," Electronic Commerce Research, Springer, vol. 24(2), pages 1267-1305, June.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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