How Resilient is the Bitcoin Protocol ?

57 Pages Posted: 23 Aug 2021 Last revised: 23 May 2022

See all articles by Charles Bertucci

Charles Bertucci

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique

Louis Bertucci

Institut Louis Bachelier

Jean-Michel Lasry

Université Paris-Dauphine, PSL Research University

Pierre-Louis Lions

Université Paris Dauphine - CEREMADE; Consultant Caisse Autonome de Refinancement (CDC group)

Date Written: May 12, 2022

Abstract

We propose a parsimonious homogenous framework for analyzing the production industry of Bitcoin. Despite a constant growth environment, the revenue per hashrate unit follows a mean reverting process. Empirically, our model fits the data well. We quantify the stability and the strength of the bitcoin transactional system which is the public good created by the Bitcoin protocol. Shocks can have a lasting effect in the medium run, but in the long run the mining equilibrium, and therefore the Blockchain security, is shown to be highly resilient even in extreme scenarios.

Keywords: Blockchain,Bitcoin,Proof-of-Work,Protocol Resilience,Mining Hardware

JEL Classification: C51,D41,L10

Suggested Citation

Bertucci, Charles and Bertucci, Louis and Lasry, Jean-Michel and Lions, Pierre-Louis, How Resilient is the Bitcoin Protocol ? (May 12, 2022). Université Paris-Dauphine Research Paper No. 3907822, Available at SSRN: https://ssrn.com/abstract=3907822 or http://dx.doi.org/10.2139/ssrn.3907822

Charles Bertucci

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91128
France

Louis Bertucci (Contact Author)

Institut Louis Bachelier ( email )

Palais Brongniart
28 Place de la Bourse
Paris, 75002
France

Jean-Michel Lasry

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

Pierre-Louis Lions

Université Paris Dauphine - CEREMADE ( email )

Place du Marechal de Lattre de Tassigny
Paris Cedex 16, 75775
France

Consultant Caisse Autonome de Refinancement (CDC group)

33 rue de Mogador
F-75009 Paris
France

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