The Public Blockchain Ecosystem: An Empirical Analysis
42 Pages Posted: 1 Nov 2019 Last revised: 5 Nov 2019
Date Written: November 3, 2019
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: Suggested Citation