Who Is Liable for a Cryptocurrency System Chain Reorg?

23 Pages Posted: 3 Feb 2021

Date Written: January 5, 2021

Abstract

Cryptocurrencies are based on digitally signed updates to a ledger maintained in a decentralized manner according to consensus mechanisms in compliance with consented protocols. Cryptocurrency systems are often presented as immutable. However, attacks and other chain reorganization possibilities—so-called chain reorgs—challenge the validity of such a claim. In this paper, chain reorg possibilities are explored together with the associated harm and liability for such harm. It is found that while certain chain reorgs may trigger a liability of those who perform the reorg, protocol developers, network participants, and misinforming agents, others may be considered a risk accepted by the participants.

Keywords: Blockchain, Cryptocurrencies, Liability

JEL Classification: E42, K13, K24, L17

Suggested Citation

Østbye, Peder, Who Is Liable for a Cryptocurrency System Chain Reorg? (January 5, 2021). Available at SSRN: https://ssrn.com/abstract=3760427 or http://dx.doi.org/10.2139/ssrn.3760427

Peder Østbye (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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