The economic dependency of the Bitcoin security
Pavel Ciaian, d'Artis Kancs, Miroslava Rajcaniova

TL;DR
This paper investigates how Bitcoin blockchain security is influenced by market outcomes, mining rewards, and costs, revealing regional differences and the system's tendency to revert to equilibrium after shocks.
Contribution
It provides empirical evidence on the dependency of Bitcoin security on market and mining factors, highlighting regional differences and dynamic adjustment processes.
Findings
Bitcoin security is linked to market prices and mining rewards.
Security dependency on mining costs varies regionally, especially in China.
Security levels revert to equilibrium after shocks.
Abstract
We study to what extent the Bitcoin blockchain security permanently depends on the underlying distribution of cryptocurrency market outcomes. We use daily blockchain and Bitcoin data for 2014-2019 and employ the ARDL approach. We test three equilibrium hypotheses: (i) sensitivity of the Bitcoin blockchain to mining reward; (ii) security outcomes of the Bitcoin blockchain and the proof-of-work cost; and (iii) the speed of adjustment of the Bitcoin blockchain security to deviations from the equilibrium path. Our results suggest that the Bitcoin price and mining rewards are intrinsically linked to Bitcoin security outcomes. The Bitcoin blockchain security's dependency on mining costs is geographically differenced - it is more significant for the global mining leader China than for other world regions. After input or output price shocks, the Bitcoin blockchain security reverts to its…
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