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The Basic Mining Game

In: The Economics of Cryptocurrencies and Digital Money

Author

Listed:
  • Augusto Schianchi

    (Università di Parma)

  • Andrea Mantovi

    (Università di Parma)

Abstract

This chapter provides an exhaustive analytic treatment of the basic mining game. The landmark approach developed by Szidarovszky and Okuguchi is complemented with more recent discussions by Arnosti and Weinberg and Mantovi in order to build a twofold—both conceptual and analytical—perspective on the nature of the strategic equilibrium at stake. The former Authors establish an “absolute” approach in which the absolute quantities of resources deployed enter the conditions for equilibrium. The latter depict a “relative” approach in which shares of resources enter the relevant equations. Original plots provide intuitive clues for comparing such visions. The cost competitiveness of players is shown to drive the concentration of mining at equilibrium. The dual perspective enables one to deepen the implications of the aggregative property of the game: the global hashrate (the aggregate level of mining/hashing activity) emerges as the pivotal degree of freedom at play.

Suggested Citation

  • Augusto Schianchi & Andrea Mantovi, 2023. "The Basic Mining Game," Palgrave Studies in Financial Services Technology, in: The Economics of Cryptocurrencies and Digital Money, chapter 0, pages 67-87, Palgrave Macmillan.
    • Handle: RePEc:pal:psincp:978-3-031-44248-3_3
    DOI: 10.1007/978-3-031-44248-3_3
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