2020/10/24 by Hansjörg Albrecher, Albrecher, Hansjoerg, Pierre-Olivier Goffard +1
Business, Management and Accounting · Computer Science · Engineering · #Advanced Queuing Theory Analysis #Blockchain Technology Applications and Security #Cryptography and Security (cs.CR) #FOS: Computer and information sciences #FOS: Economics and business #FOS: Mathematics #Mining Techniques and Economics #Optimization and Control (math.OC) #Probability (math.PR) #Risk Management (q-fin.RM)
paper · pdf · doi:10.48550/arxiv.2010.12577
openalex publication_date 2020/10/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Mining blocks on a blockchain equipped with a proof of work consensus\nprotocol is well-known to be resource-consuming. A miner bears the operational\ncost, mainly electricity consumption and IT gear, of mining, and is compensated\nby a capital gain when a block is discovered. This paper aims at quantifying\nthe profitability of mining when the possible event of ruin is also considered.\nThis is done by formulating a tractable stochastic model and using tools from\napplied probability and analysis, including the explicit solution of a certain\ntype of advanced functional differential equation. The expected profit at a\nfuture time point is determined for the situation when the miner follows the\nprotocol as well as when he/she withholds blocks. The obtained explicit\nexpressions allow to analyze the sensitivity with respect to the different\nmodel ingredients and to identify conditions under which selfish mining is a\nstrategic advantage.\n