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Achieving Consensus on Blockchains

Author

Listed:
  • Zahra Ebrahimi
  • Maxi Guennewig
  • Bryan Routledge
  • Ariel Zetlin-Jones

Abstract

Blockchain is a database technology that enables a group of self-interested users to maintain a distributed ledger without relying on a trusted third party, such as a bank. In this paper, we develop a new game-theoretic framework for analyzing blockchain systems, wherein each user determines how to update the distributed ledger. The usefulness of blockchains depends on whether users’ updating strategies achieve consensus—meaning that they agree on the correct version of the ledger and have no incentive to omit or alter past data. We show that the currently implemented strategy—the longest chain rule—fails to achieve consensus when users are sufficiently heterogeneous. We then establish the existence of new equilibrium strategies, which are slight modifications of the longest chain rule and ensure consensus regardless of the degree of heterogeneity. In practice, these equilibrium strategies enhance the resilience of blockchain systems against threats such as double-spending and 51% attacks. Our findings underscore the critical role economic incentives play in determining the security and stability of blockchain ledgers.

Suggested Citation

  • Zahra Ebrahimi & Maxi Guennewig & Bryan Routledge & Ariel Zetlin-Jones, 2025. "Achieving Consensus on Blockchains," CRC TR 224 Discussion Paper Series crctr224_2025_685, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_685
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    References listed on IDEAS

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    1. Guillaume Rocheteau & Randall Wright, 2005. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 175-202, January.
    2. Kee-Youn Kang, 2023. "Cryptocurrency and double spending history: transactions with zero confirmation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 453-491, February.
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G2 - Financial Economics - - Financial Institutions and Services

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