The Economic Limits of Bitcoin and the Blockchain

Year 2018
Author Eric Budish
Publisher University of Chicago Booth School of Business
Link View Research Paper


This research paper raises an open question for computer scientists: is there a different approach to to generating anonymous, decentralised trust in a public ledger that is less economically constrained by the possibility of an attack?  What economic limits should be considered?

Budish looks at the computational power devoted to anonymous, decentralised blockchains and what sort of conditions need to be met. Offering and in-depth critique, this paper looks at:

  • Rent-seeking competition (among blockchain miners)
  • Incentive compatibility (with respect to majority attack)
  • The economic limit of the blockchain

Computer scientists should look at the two possibilities for a Vattack and what a majority attacker can and can’t do. Taking into consideration the length of chains, different computational limits and the potential for double spending attacks, the economic limits of a blockchain should always be a priority. Download this research paper to find out more.