Evolution of Shares in a Proof-of-Stake Cryptocurrency

Ioanid Rosu and Fahad Saleh
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Ioanid Rosu: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: Do the rich always get richer by investing in a cryptocurrency for which new coins are issued according to a Proof-of-Stake (PoS) protocol? We answer this question in the negative: Without trading, the investor shares in the cryptocurrency are martingales that converge to a well-defined limiting distribution, hence are stable in the long run. This result is robust to allowing trading when investors are risk-neutral. Then, investors have no incentive to accumulate coins and gamble on the PoS protocol, but weakly prefer not to trade.

Keywords: Blockchain; cryptocurrency; asset allocation; martingale; Polya urn; Dirichlet distribution (search for similar items in EconPapers)
Date: 2020-06-13
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02896092

DOI: 10.2139/ssrn.3377136

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