Achieving Consensus on Blockchains

Zahra Ebrahimi, Maxi Guennewig, Bryan Routledge and Ariel Zetlin-Jones

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

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.

Keywords: Blockchain; consensus; double-spending (search for similar items in EconPapers)
JEL-codes: D80 D83 E42 G2 (search for similar items in EconPapers)
Pages: 63
Date: 2025-04
New Economics Papers: this item is included in nep-gth and nep-pay
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