A Game Theoretic Analysis of Resource Mining in Blockchain

Rajani  Singh; Ashutosh Dhar Dwivedi; Gautam Srivastava; Agnieszka Wiszniewska-Matyszkiel; Xiaochun Cheng

doi:10.1007/s10586-020-03046-w

A Game Theoretic Analysis of Resource Mining in Blockchain

Rajani Singh, Ashutosh Dhar Dwivedi, Gautam Srivastava, Agnieszka Wiszniewska-Matyszkiel^*, Xiaochun Cheng

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › Research › peer-review

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Abstract

Blockchain and cryptocurrency are a hot topic in today’s digital world. In this paper, we create a game theoretic model in continuous time. We consider a dynamic game model of the bitcoin market, where miners or players use mining systems to mine bitcoin by investing electricity into the mining system. Although this work is motivated by BTC, the work presented can be applicable to other mining systems similar to BTC. We propose three concepts of dynamic game theoretic solutions to the model: Social optimum, Nash equilibrium and myopic Nash equilibrium. Using the model that a player represents a single “miner” or a “mining pool”, we develop novel and interesting results for the cryptocurrency world.

Original language	English
Journal	Cluster Computing: The Journal of Networks, Software Tools and Applications
Volume	23
Issue number	3
Pages (from-to)	2035–2046
Number of pages	12
ISSN	1386-7857
DOIs	https://doi.org/10.1007/s10586-020-03046-w
Publication status	Published - Sept 2020
Externally published	Yes

Bibliographical note

Published online: 24 January 2020.

Keywords

Blockchain
Bitcoin mining
Dynamic game theory
Differential game
Hamilton–Jacobi–Bellman equation
Social optimum
Nash equilibrium
Myopic Nash equilibrium
Pigovian tax

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Cite this

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title = "A Game Theoretic Analysis of Resource Mining in Blockchain",

abstract = "Blockchain and cryptocurrency are a hot topic in today{\textquoteright}s digital world. In this paper, we create a game theoretic model in continuous time. We consider a dynamic game model of the bitcoin market, where miners or players use mining systems to mine bitcoin by investing electricity into the mining system. Although this work is motivated by BTC, the work presented can be applicable to other mining systems similar to BTC. We propose three concepts of dynamic game theoretic solutions to the model: Social optimum, Nash equilibrium and myopic Nash equilibrium. Using the model that a player represents a single “miner” or a “mining pool”, we develop novel and interesting results for the cryptocurrency world.",

keywords = "Blockchain, Bitcoin mining, Dynamic game theory, Differential game, Hamilton–Jacobi–Bellman equation, Social optimum, Nash equilibrium, Myopic Nash equilibrium, Pigovian tax, Blockchain, Bitcoin mining, Dynamic game theory, Differential game, Hamilton–Jacobi–Bellman equation, Social optimum, Nash equilibrium, Myopic Nash equilibrium, Pigovian tax",

author = "Rajani Singh and Dwivedi, {Ashutosh Dhar} and Gautam Srivastava and Agnieszka Wiszniewska-Matyszkiel and Xiaochun Cheng",

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AU - Singh, Rajani

AU - Dwivedi, Ashutosh Dhar

AU - Srivastava, Gautam

AU - Wiszniewska-Matyszkiel, Agnieszka

AU - Cheng, Xiaochun

N1 - Published online: 24 January 2020.

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N2 - Blockchain and cryptocurrency are a hot topic in today’s digital world. In this paper, we create a game theoretic model in continuous time. We consider a dynamic game model of the bitcoin market, where miners or players use mining systems to mine bitcoin by investing electricity into the mining system. Although this work is motivated by BTC, the work presented can be applicable to other mining systems similar to BTC. We propose three concepts of dynamic game theoretic solutions to the model: Social optimum, Nash equilibrium and myopic Nash equilibrium. Using the model that a player represents a single “miner” or a “mining pool”, we develop novel and interesting results for the cryptocurrency world.

AB - Blockchain and cryptocurrency are a hot topic in today’s digital world. In this paper, we create a game theoretic model in continuous time. We consider a dynamic game model of the bitcoin market, where miners or players use mining systems to mine bitcoin by investing electricity into the mining system. Although this work is motivated by BTC, the work presented can be applicable to other mining systems similar to BTC. We propose three concepts of dynamic game theoretic solutions to the model: Social optimum, Nash equilibrium and myopic Nash equilibrium. Using the model that a player represents a single “miner” or a “mining pool”, we develop novel and interesting results for the cryptocurrency world.

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KW - Dynamic game theory

KW - Differential game

KW - Hamilton–Jacobi–Bellman equation

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KW - Myopic Nash equilibrium

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KW - Differential game

KW - Hamilton–Jacobi–Bellman equation

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KW - Nash equilibrium

KW - Myopic Nash equilibrium

KW - Pigovian tax

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