CFDP 2204

Bitcoin: An Impossibility Theorem for Proof-of-Work based Protocols

Publication Date: October 2019

Pages: 11

Abstract: 

A key part of decentralized consensus protocols is a procedure for random selection, which is the source of the majority of miners cost and wasteful energy consumption in Bitcoin. We provide a simple economic model for random selection mechanism and show that any PoW protocol with natural desirable properties is outcome equivalent to the random selection mechanism used in Bitcoin.

Keywords: Bitcoin, Random Selection, Proportional Selection Rule, Impossibility Theorem

JEL Classification Codes: C72, D02, D47

JEL Classification Codes: C72D02D47