Optimal mining in proof-of-work blockchain protocols
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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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2023-05
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Mcode
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Language
en
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Finance Research Letters, Volume 53
Abstract
This paper examines the economic mechanism of cryptocurrency mining. By presenting a profit function, a maximization equilibrium is obtained. The model provides a formal approach to the demand for hashing power as a function of revenues, mining costs and the number of miners. We consider how the equilibrium is affected by passive miners. We use these results to introduce a formulation of the price elasticity of the demand for hashing power with respect to the cost of energy. The model is simulated using Reinforcement Learning algorithms that arrive to similar equilibrium results. The article concludes with implications of the model for policymaking.Description
Publisher Copyright: © 2022 The Author(s)
Keywords
Cryptocurrencies, Elasticity, Hashrate, Machine learning, Mining, Proof-of-work
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Citation
Soria, J, Moya, J & Mohazab, A 2023, ' Optimal mining in proof-of-work blockchain protocols ', Finance Research Letters, vol. 53, 103610 . https://doi.org/10.1016/j.frl.2022.103610