Blockchain Forks: A Formal Classification Framework and Persistency Analysis

Schär, Fabian (2020): Blockchain Forks: A Formal Classification Framework and Persistency Analysis. Forthcoming in: Singapore Economic Review , Vol. tbd, No. forthcoming (2020)

Abstract

Blockchain forks can have severe economic implications, sow uncertainty and undermine trust. In this paper, we introduce a formal framework to study the emergence, persistency and economic consequences of blockchain forks. We argue that blockchain forks can be process- or protocol-based and emerge unintentionally or deliberately. We then proceed with a sub-classification of protocol-based forks and study the circumstances under which a chain split may become permanent. It can be shown that the persistency of a fork depends on the nature of the change to the consensus rules and on the relative allocation of the consensus-relevant resources. Lastly, we discuss business implications as well as potential consequences for policy makers and practitioners.

• Item Type: MPRA Paper
• Language: English
• Keywords: blockchain, chain split, cryptoasset, distributed ledger, fork
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation

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