Document Type

Discussion Paper

Publication Date


CFDP Number


CFDP Revision Date

November 1, 2019

CFDP Pages


Journal of Economic Literature (JEL) Code(s)

C72, D02, D47


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 which 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: no protocol satisfies the aforementioned constraints simultaneously without giving miners a strict incentive to merge. Furthermore, any protocol either gives up on some degree of decentralization or its reward scheme is equivalent to Bitcoin’s.

Included in

Economics Commons