From mining to markets: The evolution of bitcoin transaction fees

David Easley, Maureen O'Hara and Soumya Basu

Journal of Financial Economics, 2019, vol. 134, issue 1, 91-109

Abstract: We investigate the role that transaction fees play in the bitcoin blockchain's evolution from a mining-based structure to a market-based ecology. We develop a game-theoretic model to explain the factors leading to the emergence of transactions fees, as well as to explain the strategic behavior of miners and users. Our model highlights the role played by mining rewards, transaction fees, price, and waiting time, discusses welfare issues, and examines how microstructure features such as exogenous structural constraints influence the dynamics of user participation on the blockchain. We provide empirical evidence on the model's predictions and discuss implications for bitcoin's evolution.

Keywords: Bitcoin; Blockchain; Market microstructure; Transaction fees (search for similar items in EconPapers)
JEL-codes: D47 D6 G10 G18 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (167)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X19300583
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:134:y:2019:i:1:p:91-109

DOI: 10.1016/j.jfineco.2019.03.004

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().