Evolution of Shares in a Proof-of-Stake Cryptocurrency

Ioanid Rosu () and Fahad Saleh
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Ioanid Rosu: HEC Paris
Fahad Saleh: University of Florida

No 1339, HEC Research Papers Series from HEC Paris

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)
JEL-codes: C60 G11 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-05-20
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1339

DOI: 10.2139/ssrn.3377136

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