Decentralized Mining in Centralized Pools

Review of Financial Studies - Tập 34 Số 3 - Trang 1191-1235 - 2021
Lin William Cong1, Zhiguo He2, Jiasun Li3
1SC Johnson College of Business, Cornell University
2Booth School of Business, University of Chicago and NBER
3School of Business, George Mason University

Tóm tắt

AbstractThe 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.

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