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Evolution of Shares in a Proof-of-Stake Cryptocurrency

Author

Listed:
  • Ioanid Rosu

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Fahad Saleh

Abstract

Do the rich always get richer by investing in a cryptocurrency for which new coins are issued according to a Proof-of-Stake (PoS) protocol? We answer this question in the negative: Without trading, the investor shares in the cryptocurrency are martingales that converge to a well-defined limiting distribution, hence are stable in the long run. This result is robust to allowing trading when investors are risk-neutral. Then, investors have no incentive to accumulate coins and gamble on the PoS protocol, but weakly prefer not to trade.

Suggested Citation

  • Ioanid Rosu & Fahad Saleh, 2020. "Evolution of Shares in a Proof-of-Stake Cryptocurrency," Working Papers hal-02896092, HAL.
    • Handle: RePEc:hal:wpaper:hal-02896092
    DOI: 10.2139/ssrn.3377136
    as

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    Citations

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    Cited by:

    1. Lin William Cong & Xi Li & Ke Tang & Yang Yang, 2023. "Crypto Wash Trading," Management Science, INFORMS, vol. 69(11), pages 6427-6454, November.
    2. Carlo Gola & Johannes Sedlmeir, 2022. "Addressing the Sustainability of Distributed Ledger Technology," Questioni di Economia e Finanza (Occasional Papers) 670, Bank of Italy, Economic Research and International Relations Area.
    3. Matthias Nadler & Fabian Schar, 2020. "Decentralized Finance, Centralized Ownership? An Iterative Mapping Process to Measure Protocol Token Distribution," Papers 2012.09306, arXiv.org.
    4. Ramesohl, Stephan & Lauten-Weiss, Julian & Kobiela, Georg, 2021. "Blockchains nachhaltig gestalten: Vorschlag von nachhaltigkeitsorientierten Entscheidungskriterien und eines Verfahrenskonzepts für die Umsetzung staatlich geförderter oder initiierter Projekte im Ber," Wuppertal Reports 21, Wuppertal Institute for Climate, Environment and Energy.
    5. Jingxing (Rowena) Gan & Gerry Tsoukalas & Serguei Netessine, 2021. "Initial Coin Offerings, Speculation, and Asset Tokenization," Management Science, INFORMS, vol. 67(2), pages 914-931, February.

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