Bitcoin: An Axiomatic Approach and an Impossibility Theorem
Jacob D. Leshno
American Economic Review: Insights
no. 3, September 2020
Bitcoin's main innovation lies in allowing a decentralized system that relies on anonymous, profit-driven miners who can freely join the system. We formalize these properties in three axioms: anonymity of miners, no incentives for miners to consolidate, and no incentive to assuming multiple fake identities. This novel axiomatic formalization allows us to characterize what other protocols are feasible: every protocol with these properties must have the same reward scheme as Bitcoin. This implies an impossibility result for risk-averse miners. Furthermore, any protocol either gives up on some degree of decentralization or its reward scheme is equivalent to Bitcoin's.
Leshno, Jacob D., and Philipp Strack.
"Bitcoin: An Axiomatic Approach and an Impossibility Theorem."
American Economic Review: Insights,
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