Open AccessThe Bitcoin Mining Game
Author(s) -
Nicolas Houy
Publication year - 2016
Publication title -
ledger
Language(s) - English
Resource type - Journals
ISSN - 2379-5980
DOI - 10.5195/ledger.2016.13
Subject(s) - proof of work system , nash equilibrium , incentive , database transaction , computer science , protocol (science) , process (computing) , function (biology) , block (permutation group theory) , face (sociological concept) , cryptocurrency , space (punctuation) , game theory , work (physics) , computer security , mathematical economics , microeconomics , economics , mathematics , engineering , social science , alternative medicine , pathology , sociology , biology , operating system , geometry , evolutionary biology , programming language , medicine , mechanical engineering
This article deals with the mining incentives in the Bitcoin protocol. The mining process is used to confirm and secure transactions. This process is organized as a speed game between individuals or firms – the miners – with different computational powers to solve a mathematical problem, bring a proof of work, spread their solution and reach consensus among the Bitcoin network nodes with it. First, we define and specify this game. Second, we analytically find its Nash equilibria in the two-player case. We analyze the parameters for which the miners would face the proper incentives to fulfill their function of transaction processors in the current situation. Finally, we study the block space market offer.