Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.This publication is available on the BIS website (www.bis.org).

show abstract

Section: Resultsmentioning

confidence: 99%

Permissioned Distributed Ledgers and the Governance of Money

2021

View full text Add to dashboard Cite

show abstract

“…Gervais et al (2016) present a dynamic analysis of the costs and benefits of various attack vectors. Garatt and van Oordt (2020) examine the role of fixed cost of capital formation for the security of Proof-of-Work Based Cryptocurrencies, Böhme et al (2015) and Schilling and Uhlig (2019) present discussions of broader economic implications and governance issues, respectively. Leshno and Strack (2020) present a generalization of such analysis, demonstrating that no other anonymous and proof-of-work-based cyrptocurrencies can improve upon the performance of Bitcoin.…”

Section: Preview Of Resultsmentioning

confidence: 99%

Distributed Ledgers and the Governance of Money

2021

View full text Add to dashboard Cite

Blockchain technology breathes new life into the classical analysis of money as a substitute for a ledger of all past transactions. While it involves updating the ledger through a decentralized consensus on the unique truth, the robustness of the equilibrium that supports this consensus depends on who has access to the ledger and how it can be updated. Using a global game analysis of an exchange economy with credit, we solve for the optimal ledger design that balances security, scalability and decentralization. When intertemporal incentives are strong, a centralized ledger is always optimal. Otherwise, decentralization may be optimal.

show abstract

“…That taxonomy divides characteristic into the classes costs, security, and convenience, with the possibility to add other categories for things such as payment amounts. We decided to include "transaction costs" as the sole characteristic for costs, as fixed costs do not really factor into cryptocurrency usage, and are only really discussed in the context of mining [25]. In the category security we consider "confidentiality" with the possible instances low, medium, or high, as well as "anonymity" with given or not given.…”

Section: Morphological Tablementioning

confidence: 99%

Acceptance Factors for Cryptocurrencies as Payment Systems

Hamm¹

2022

Proceedings of the Annual Hawaii International Conference on System Sciences

View full text Add to dashboard Cite

The adoption of cryptocurrencies and blockchain technologies is an active field of research in information systems, looking at the promise and issues hampering the arrival of cryptocurrencies as a general means of payment. However, an overwhelming number of papers only look at existing users and usually limit themselves to a single cryptocurrency, mostly Bitcoin. This paper adds to the body of research by creating a taxonomy of features for cryptocurrencies as payment systems, and conducting a user study with over 500 participants asking what features are most relevant for the adoption of a cryptocurrency. We identify cost-effectiveness and data confidentiality as crucial for potential users, but also find that these two factors are followed by a wealth of convenience features that have found less emphasis in present cryptocurrency implementations.

show abstract

Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies

Cited by 18 publications

References 34 publications

Permissioned Distributed Ledgers and the Governance of Money

Permissioned Distributed Ledgers and the Governance of Money

Distributed Ledgers and the Governance of Money

Acceptance Factors for Cryptocurrencies as Payment Systems

Contact Info

Product

Resources

About