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Decentralized Mining in Centralized Pools

delete2020-04-03
delete105
delete
OA
AI
丛
丛林 (Lin William Cong) *
Z
Zhiguo He
J
Jiasun Li
DOI：10.1093/rfs/hhaa040delete
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Abstract

Abstract

En 中文
The rise of centralized mining pools for risk sharing does not necessarily undermine the decentralization required for blockchains: because of miners' cross-pool diversification and pool managers' endogenous fee setting, larger pools better internalize their externality on global hash rates, charge higher fees, attract disproportionately fewer miners, and grow more slowly. Instead, mining pools as a financial innovation escalate miners' arms race and significantly increase the energy consumption of proof-of-work-based blockchains. Empirical evidence from Bitcoin mining supports our model's predictions. The economic insights inform other consensus protocols and the industrial organization of mainstream sectors with similar characteristics but ambiguous prior findings.
Keywords:
ENERGY-CONSUMPTION
BLOCKCHAIN

Journal

Review of Financial Studies cover
Review of Financial Studies
IF:
5.4
Papers:
2.8K
Citations:
3.0W

Organization

G
George Mason University
Scholars:
7.7K
Papers: 7.9K
Citations: 1.0W
U
university of chicago
Scholars:
4.4W
Papers: 3.7W
Citations: 80
C
Cornell University
Scholars:
6.3W
Papers: 5.4W
Citations: 10.9W
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