A Competition Model for Mining Cryptocurrencies
Date Issued
2014
Date
2014
Author(s)
Lin, Hsin-Ying
Abstract
Many previously proposed competition models only allow consumers to choose a product with a higher utility, provided by just one of the competitors. However, in cryptocurrency market, miners are allowed to mine multiple cryptocurrencies simultaneously, not just limited to one. Therefore, in this thesis, we propose a weighted effort model to study the competition between two cryptocurrencies, where every miner is allowed to allocate some efforts to one cryptocurrency and the rest to the other. The proposed model extends the concept of the previous currency studies by using the network benefit to model the value of a cryptocurrency, and takes mining cost, exogenous risk, miners’ intrinsic mining benefit sensitivity into account. Unlike previously proposed un-weighted effort models (winner-take-all), our weighted effort model takes the small amount of efforts collected from miners into account, and shows that the smaller cryptocurrency can survive by aggregating the small amount of efforts even though it doesn’t have the advantage of network benefit over its competitor. It also shows that foundations are more likely to overcome stiff competition and miners can obtain higher utilities if weighted effort strategy is adopted. The analytical results can provide some strategic insights for miners and help foundations formulate competitive strategies to run their cryptocurrencies.
Subjects
競爭模型
密碼幣
權重式選擇
網路外部性
Type
thesis
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