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Blockchains, Coordination, and Forks

Author

Listed:
  • Bruno Biais
  • Christophe Bisière
  • Matthieu Bouvard
  • Catherine Casamatta
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.

Suggested Citation

  • Bruno Biais & Christophe Bisière & Matthieu Bouvard & Catherine Casamatta, 2019. "Blockchains, Coordination, and Forks," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 88-92, May.
    • Handle: RePEc:aea:apandp:v:109:y:2019:p:88-92
    Note: DOI: 10.1257/pandp.20191018
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    File URL: https://www.aeaweb.org/doi/10.1257/pandp.20191018
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    Citations

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    Cited by:

    1. Ha, Le Thanh, 2024. "Dynamic spill-over influences of FinTech innovation development on renewable energy volatility during the time of war in pandemic: A novel insight from a wavelet model," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 515-529.
    2. Thanh Ha, Le & Bouteska, Ahmed & Harasheh, Murad, 2024. "Dynamic connectedness between FinTech and energy markets: Evidence from fat tails, serial dependence, and Bayesian approach," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 574-586.
    3. Benigno, Pierpaolo & Schilling, Linda M. & Uhlig, Harald, 2022. "Cryptocurrencies, currency competition, and the impossible trinity," Journal of International Economics, Elsevier, vol. 136(C).
    4. Hokkanen, Topi, 2023. "Externalities and market failures of cryptocurrencies," BoF Economics Review 4/2023, Bank of Finland.
    5. Kim, Hyeonoh & Ha, Chang Yong & Ahn, Kwangwon, 2022. "Preference heterogeneity in Bitcoin and its forks' network," Chaos, Solitons & Fractals, Elsevier, vol. 164(C).

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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