The Economic Dependency of the Bitcoin Security

Pavel Ciaian, d'Artis Kancs and Miroslava Rajcaniova

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: We study to what extent the Bitcoin blockchain security permanently depends on the underlying distribution of cryptocurrency market outcomes. We use daily blockchain and Bitcoin data for 2014-2019 and employ the ARDL approach. We test three equilibrium hypotheses: (i) sensitivity of the Bitcoin blockchain to mining reward; (ii) security outcomes of the Bitcoin blockchain and the proof-of-work cost; and (iii) the speed of adjustment of the Bitcoin blockchain security to deviations from the equilibrium path. Our results suggest that the Bitcoin price and mining rewards are intrinsically linked to Bitcoin security outcomes. The Bitcoin blockchain security’s dependency on mining costs is geographically differenced – it is more significant for the global mining leader China than for other world regions. After input or output price shocks, the Bitcoin blockchain security reverts to its equilibrium security level.

Keywords: Bitcoin; blockchain; proof-of-work; ARDL; institutional governance technology (search for similar items in EconPapers)
JEL-codes: D82 G12 G15 G29 (search for similar items in EconPapers)
Date: 2021-01-01
New Economics Papers: this item is included in nep-cwa and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.eeri.eu/documents/wp/EERI_RP_2021_01.pdf (application/pdf)

Related works:
Journal Article: The economic dependency of bitcoin security (2021)
Working Paper: The economic dependency of the Bitcoin security (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2021_01

Access Statistics for this paper

More papers in EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels Contact information at EDIRC.
Bibliographic data for series maintained by Julia van Hove ().