Welcome to the resource topic for 2023/1516
Can open decentralized ledgers be economically secure?
Authors: Jacob Leshno, Rafael Pass, Elaine ShiAbstract:
Traditional payment processors are the subject of antitrust concerns and regulations. Open
decentralized ledgers (e.g., Bitcoin) provide an alternative. They do not rely on a central
authority, avoiding antitrust and monopoly concerns. However, the open nature of these systems
gives rise to many challenges, including fundamental questions about their security.
To address this question, we consider a framework that combines economic theory and dis-
tributed systems theory and define economic security for general permissionless decentralized
ledgers. Analysis of Bitcoin’s Nakamoto protocol shows that block rewards are ineffective in pro-
viding economic security due to limitations of incentives in environments with many anonymous
participants. We present an alternative protocol showing that an open decentralized ledger can
be economically secure.
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