Blockchains, Coordination, and Forks
- (pp. 88-92)
AbstractBlockchains 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.
CitationBiais, Bruno, Christophe Bisière, Matthieu Bouvard, and Catherine Casamatta. 2019. "Blockchains, Coordination, and Forks." AEA Papers and Proceedings, 109: 88-92. DOI: 10.1257/pandp.20191018
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- O33 Technological Change: Choices and Consequences; Diffusion Processes