Work

Miners' Reward Elasticity and Stability of Competing Proof‐of‐Work Cryptocurrencies

Year: 2026

Type: article

Abstract: ABSTRACT Proof‐of‐Work cryptocurrencies employ miners to sustain the system through algorithmic reward adjustments. We develop a stochastic model of the multicurrency mining and identify conditions for stable transaction speeds. Bitcoin's algorithm requires hash supply elasticity 1 for stability, while ASERT remains stable for any elasticity and can be interpreted as a form of stochastic gradient descent. Interactions with other currencies can relax Bitcoin's stability requirements. Using a halving event, we estimate miners' hash supply elasticity and conduct counterfactual simulations. Our findings reveal Bitcoin's heavy reliance on low hash supply elasticity and interactions with smaller cryptocurrencies, urging an algorithm upgrade for stability.

Source: International Economic Review

DOI: 10.1111/iere.70060

Authors: Kohei Kawaguchi, Junpei Komiyama, Shunya Noda

Institutions: Hong Kong University of Science and Technology, New York University, The University of Tokyo

Language: English

Topic: Blockchain Technology Applications and Security

Subfield: Information Systems

Field: Computer Science

Domain: Physical Sciences

Open Access status: hybrid

Estimated APC paid: $3,570

OpenAlex ID: W7127987310

FWCI:

Cites: 31

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