Computational economic analyses for blockchain technologies

Abstract

it is a decentralized system that functions by directly or indirectly incentivizing rational entities. The complex nature in which many entities exist often leads to problems in terms of properties that blockchain technology should satisfy. For example, many systems are known to have problems in security and decentralization, two of the most important properties of the technology, due to rational behaviors of users. In addition, although a stablecoin that promises price stability to address the high price volatility of existing cryptocurrencies has been designed, the complex nature of users that anyone cannot predict has made price instability risks not perfectly eliminated in the existing stablecoins.

The goal of this dissertation is to identify the fundamental limitations of blockchain technologies, considering many entities participating in the systems, to provide insights on guidelines of a blockchain system design. Specifically, we show that, through a game-theoretical approach, it is impossible to design a mechanism that makes rational users pursuing a higher profit follow the two design goals that engineers want to realize: According to their principles, (1) the blockchain systems should achieve a high level of decentralization, and (2) stablecoins should attain high price stability. To show this, we first start conducting several case studies and then move on to general and fundamental problems by focusing on the economic aspects of blockchain.

Blockchain technology has been first proposed to implement a decentralized secure system. Since then, it has evolved to facilitate various applications. Blockchain technology is inherently complicated