Blockchains, Coordination, and Forks

Bruno Biais, Christophe Bisière, Matthieu Bouvard and Catherine Casamatta

AEA Papers and Proceedings, 2019, vol. 109, 88-92

Abstract: Blockchains are distributed ledgers. Their protocol aims at ensuring that the miners in charge of recording transactions reach a consensus about a unique ledger. In this paper, we highlight that the game induced by the blockchain proof-of-work protocol generates several equilibria. In some equilibria, different versions of the ledger or "branches" coexist, breaching consensus. Such forks arise because of the interplay of miners' incentives to coordinate on the same branch, and miners' incentives to protect their vested interests on a given branch. We illustrate that these elements were present in the recent hard forks that occurred on Bitcoin.

JEL-codes: E42 O33 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pandp.20191018
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Citations: View citations in EconPapers (5)

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