The Blockchain Folk TheoremBruno Biais, University of ToulouseChristophe Bisiere, Universite de ToulouseMatthieu Bouvard, McGill UniversityCatherine Casamatta, Universite de ToulouseAbstractBlockchains are distributed ledgers, operated within peer-to-peer networks. If reliable and stable, they could offer a new, cost effective way to record transactions, but are they? We model the proof-of-work blockchain protocol as a stochastic game and analyse the equilibrium strategies of rational, strategic miners. Mining the longest chain is a Markov perfect equilibrium, without forking, in line with Nakamoto (2008). The blockchain protocol, however, is a coordination game, with multiple equilibria. There exist equilibria with forks, leading to orphaned blocks and persistent divergence between chains. We also show how forks can be generated by information delays and software upgrades. La
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