Blockchain Economics / Joseph Abadi, Markus Brunnermeier.

Format:

Book

Author/Creator:

Abadi, Joseph.

Contributor:

National Bureau of Economic Research.

Brunnermeier, Markus.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25407.

NBER working paper series no. w25407

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

The fundamental problem in digital record-keeping is to establish consensus on an update to a ledger, e.g., a payment. Consensus must be achieved in the presence of faults--situations in which some computers are offline or fail to function appropriately. Traditional centralized record-keeping systems rely on trust in a single entity to achieve consensus. Blockchains decentralize record-keeping, dispensing with the need for trust in a single entity, but some instead build a consensus based on the wasteful expenditure of computational resources (proof-of-work). An ideal method of consensus would be tolerant to faults, avoid the waste of computational resources, and be capable of implementing all individually rational transfers of value among agents. We prove a Blockchain Trilemma: any method of consensus, be it centralized or decentralized, must give up (i) fault-tolerance, (ii) resource-efficiency, or (iii) full transferability.

Notes:

Print version record

December 2018.