Bitcoin: An Axiomatic Approach and an Impossibility Theorem

Jacob D. Leshno and Philipp Strack ()

American Economic Review: Insights, 2020, vol. 2, issue 3, 269-86

Abstract: Bitcoin's main innovation lies in allowing a decentralized system that relies on anonymous, profit-driven miners who can freely join the system. We formalize these properties in three axioms: anonymity of miners, no incentives for miners to consolidate, and no incentive to assuming multiple fake identities. This novel axiomatic formalization allows us to characterize what other protocols are feasible: every protocol with these properties must have the same reward scheme as Bitcoin. This implies an impossibility result for risk-averse miners. Furthermore, any protocol either gives up on some degree of decentralization or its reward scheme is equivalent to Bitcoin's.

JEL-codes: D82 E42 O33 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (35)

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DOI: 10.1257/aeri.20190494

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