PoW, PoS, & Hybrid protocols: A Matter of Complexity?

TL;DR

This paper analyzes the complexity of PoW, PoS, and hybrid cryptocurrencies using Information Theory and Statistical Complexity, aiming to assess their potential for chaotic behavior and systemic risks.

Contribution

It extends previous complexity analysis to various cryptocurrency protocols using Information Theory, providing a framework for comparing their systemic risks.

Findings

Bitcoin and other cryptocurrencies exhibit measurable complexity levels.

Hybrid protocols may have different complexity profiles compared to pure PoW or PoS.

Further measures are being explored to better understand system complexity.

Abstract

In a previous paper, it was discussed whether Bitcoin and/or its blockchain could be considered a complex system and, if so, whether a chaotic one, a positive response raising concerns about the likelihood of Bitcoin/blockchain entering a chaotic regime, with catastrophic consequences for financial systems based on it. This paper intends to simplify and extend that analysis to other PoW, PoS, and hybrid protocol-based cryptocurrencies. As before, this study was carried out with the help of Information Theory of Complex Systems, in general, and Crutchfield's Statistical Complexity measure, in particular. This paper is a work-in-progress. We intend to uncover some other measures that capture the qualitative notion of complexity of systems that can be applied to these cryptocurrencies to compare with the results here obtained.