PoW Blockchain Network's Short-term Self-correction Mechanism

54 Pages Posted: 27 Feb 2021 Last revised: 6 Jul 2021

See all articles by Dunzhe Tang

Dunzhe Tang

Tsinghua University, SEM

Ping He

Tsinghua University, SEM

Zhongjie Fan

Tsinghua University - Tsinghua University School of Economics and Management

Date Written: December 30, 2020

Abstract

This paper uses a partial equilibrium framework to prove that in the short-term, network hashrate shock affects average miner income through both transaction fee income and block reward income.
Using Bitcoin blockchain data, we show that miner average transaction fee income goes in the opposite direction to network hashrate shock while miner average block reward income goes in the same direction as the shock.
This implies the coexistence of a positive and negative feedback loop between network hashrate and miner income. As block reward diminishes, PoW blockchain networks should become more stable and resilient to exogenous hashrate shocks.

Keywords: Blockchain, Proof-of-Work, Bitcoin, Hashrate, Miner, Transaction Fee

JEL Classification: G00, D50, E42, L86

Suggested Citation

Tang, Dunzhe and He, Ping and Fan, Zhongjie, PoW Blockchain Network's Short-term Self-correction Mechanism (December 30, 2020). Available at SSRN: https://ssrn.com/abstract=3757830 or http://dx.doi.org/10.2139/ssrn.3757830

Dunzhe Tang (Contact Author)

Tsinghua University, SEM ( email )

Beijing, 100084
China

Ping He

Tsinghua University, SEM ( email )

Beijing, 100084
China
8610-62795754 (Phone)
8610-62784554 (Fax)

HOME PAGE: http://www.sem.tsinghua.edu.cn/en/heping

Zhongjie Fan

Tsinghua University - Tsinghua University School of Economics and Management ( email )

Beijing
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
48
Abstract Views
338
PlumX Metrics