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Computer Science > Computer Science and Game Theory

arXiv:2206.02871 (cs)
[Submitted on 6 Jun 2022]

Title:Cooperation among an anonymous group protected Bitcoin during
failures of decentralization

Authors:Alyssa Blackburn, Christoph Huber, Yossi Eliaz, Muhammad S.
Shamim, David Weisz, Goutham Seshadri, Kevin Kim, Shengqi Hang, Erez
Lieberman Aiden
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    Abstract: Bitcoin is a digital currency designed to rely on a
    decentralized, trustless network of anonymous agents. Using a
    pseudonymous-address-linking procedure that achieves >99%
    sensitivity and >99% specificity, we reveal that between launch
    (January 3rd, 2009), and when the price reached $1 (February 9th,
    2011), most bitcoin was mined by only sixty-four agents. This was
    due to the rapid emergence of Pareto distributions in bitcoin
    income, producing such extensive resource centralization that
    almost all contemporary bitcoin addresses can be connected to
    these top agents by a chain of six transactions. Centralization
    created a social dilemma. Attackers could routinely exploit
    bitcoin via a "51% attack", making it possible for them to
    repeatedly spend the same bitcoins. Yet doing so would harm the
    community. Strikingly, we find that potential attackers always
    chose to cooperate instead. We model this dilemma using an
    N-player Centipede game in which anonymous players can choose to
    exploit, and thereby undermine, an appreciating good. Combining
    theory and economic experiments, we show that, even when
    individual payoffs are unchanged, cooperation is more frequent
    when the game is played by an anonymous group. Although bitcoin
    was designed to rely on a decentralized, trustless network of
    anonymous agents, its early success rested instead on cooperation
    among a small group of altruistic founders.

Comments: 12 pages main text 6 main text figures 76 total pages 23
          supplemental figures
Subjects: Computer Science and Game Theory (cs.GT); Computers and
          Society (cs.CY); Physics and Society (physics.soc-ph)
Cite as:  arXiv:2206.02871 [cs.GT]
          (or arXiv:2206.02871v1 [cs.GT] for this version)
          https://doi.org/10.48550/arXiv.2206.02871
          Focus to learn more
          arXiv-issued DOI via DataCite

Submission history

From: Alyssa Blackburn [view email]
[v1] Mon, 6 Jun 2022 19:54:21 UTC (16,036 KB)
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