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Miners' Reward Elasticity and Stability of Competing Proof-of-Work Cryptocurrencies - Shunya Noda
Bio: Shunya Noda works for the Department of Economics at the University of Tokyo as an assistant professor. His research field is market design, matching theory, and auction theory. He has aimed for solving real-world problems and conducted research that carefully discusses implementation possibility. He is always searching for a new market to be analyzed, and in recent years, he has been focusing on the economics of cryptocurrencies and smart contracts. He worked at the Vancouver School of Economics, the University of British Colombia before joining the University of Tokyo. He received a Ph.D. in Economics from Stanford University.

Abstract: Proof-of-Work cryptocurrencies, such as Bitcoin and its forks, hire miners (freelance contributors) to maintain the system by algorithmically setting the reward. Therefore, the nature of miners' labor supply is essential for the cryptocurrency's stability. We develop a short-run supply-side model of the multicurrency mining market and estimate miners' labor supply elasticity by exploiting the discontinuity created by an event called halving. The stability of Bitcoin hinges on external factors lowering the labor supply elasticity, such as the interaction with competing currencies. Upgrading algorithm can stabilize Bitcoin regardless of external factors and improve the mining market's energy consumption rate by 2.9%

Feb 7, 2023 04:00 PM in Universal Time UTC

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