The Public Blockchain Ecosystem: An Empirical Analysis

42 Pages Posted: 1 Nov 2019 Last revised: 5 Nov 2019

See all articles by Franz J. Hinzen

Franz J. Hinzen

New York University (NYU) - Department of Finance

Felix Irresberger

University of Leeds - Leeds University Business School (LUBS)

Kose John

New York University (NYU) - Department of Finance

Fahad Saleh

McGill University - Desautels Faculty of Management

Date Written: November 3, 2019

Abstract

This paper examines the landscape of public blockchains, focusing on consensus protocols. We propose an empirical framework that takes inspiration from the blockchain trilemma. We construct empirical analogs for each of its three attributes: (i) scale, (ii) security, and (iii) decentralization. Our results establish that Proof-of-Work (PoW) blockchains dominate on decentralization and that this dominance arises from an early-mover's advantage. We also demonstrate that Delegated Proof-of-Stake (DPoS) blockchains dominate on scale and that blockchains using non-standard protocols are most secure. We employ a hierarchical clustering algorithm that selects clusters on the basis of the three attributes. The first level of clustering identifies a set of blockchains that perform well on all three attributes. Within that set, we find further sub-clusters that are differentiated by their performance along the trilemma attributes. These sub-clusters also partition the space of consensus protocols thereby highlighting functional differences across protocols. Finally, we examine the relationship between blockchain usage and our attributes. We find that our attributes explain most of the variation in usage. We document a shift towards DPoS blockchain usage and that scale gains in relevance over time.

Keywords: Blockchain, Proof-of-Work, Proof-of-Stake, Delegated Proof-of-Stake, Decentralization, Scale, Security, Cryptoasset, Cryptocurrency

JEL Classification: C0, G0, O3

Suggested Citation

Hinzen, Franz J. and Irresberger, Felix and John, Kose and Saleh, Fahad, The Public Blockchain Ecosystem: An Empirical Analysis (November 3, 2019). NYU Stern School of Business. Available at SSRN: https://ssrn.com/abstract=3478264

Franz J. Hinzen

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
New York, NY 10012
United States

Felix Irresberger

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Fahad Saleh (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

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