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The Bitcoin mining games

  • Nicolas Houy


    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

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    When processing transactions in a block, a miner increases his reward but also decreases his probability to earn any reward because the time needed for his block to reach consensus depends on its size. We show that this leads to a game situation between miners. We analytically solve this game for two miners. Then, we show that miners do not play a Nash equilibrium in the current Bitcoin mining environment, instead, they should not process any transaction. Finally, we show that the situation where no transaction is ever processed would stop being a Nash equilibrium if the transaction fee was multiplied or, equivalently, the fixed reward divided by a factor of about 12.

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    Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 1412.

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    Date of creation: 2014
    Date of revision:
    Handle: RePEc:gat:wpaper:1412
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