Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197887 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-34
Publisher: 
Bank of Canada, Ottawa
Abstract: 
A blockchain is a digital ledger that keeps track of a record of ownership without the need for a designated party to update and enforce changes to the record. The updating of the ledger is done directly by the users of the blockchain and is traditionally governed by a proof-of-work (PoW) protocol. We formalize this protocol as a Cournot game where users compete to update the blockchain for a reward. Cheating occurs in the form of "double spending" when users try to tamper with ownership records in order to defraud their counterparties. Ruling out incentives to cheat can be summarized in the form of a "no double-spending constraint." These constraints put restrictions on the design of a blockchain and, thus, play a role akin to incentive compatibility constraints in classic mechanism design.
Subjects: 
Digital currencies
Payment clearing and settlement systems
Economic models
JEL: 
G2
H4
P43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
495.81 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.