The Public Blockchain Ecosystem: An Empirical Analysis

40 Pages Posted: 1 Nov 2019 Last revised: 2 Apr 2020

See all articles by Felix Irresberger

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: April 1, 2020

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 framework allows us to quantitatively compare and rank blockchains of various kinds.

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.

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

JEL Classification: C0, G0, O3

Suggested Citation

Irresberger, Felix and John, Kose and Saleh, Fahad, The Public Blockchain Ecosystem: An Empirical Analysis (April 1, 2020). NYU Stern School of Business. Available at SSRN: https://ssrn.com/abstract=3478264 or http://dx.doi.org/10.2139/ssrn.3478264

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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