Opportunities for Further Research

 

Many topics of possible research are not included in the analysis. One topic for further investigation is the possibility of a “51% attack” in which one large miner (or a group of colluding miners) seeks to falsify the block chain by commanding over half of the computing power of the bitcoin network. This problem is briefly mentioned by Kroll, Davey and Felten 44 (2013), but remains a topic for additional inquiry as to whether there is an economic incentive to take control of the network. Another topic not explored by this paper is the effect of risk aversion the decisions of potential miners. Given the probabilistic nature of mining rewards but the certainty of costs, bitcoin mining lends itself to a utility framework that discounts uncertain outcomes. Risk aversion indeed explains the creation of bitcoin mining pools that split mining rewards, and so this trend in industry structure could potentially be supported by such a model. More realism could be applied to the model that incorporates some dynamic features. These would include a discounting of future expected profit as well as a time dependent move toward equilibrium. Such adjustments would help better ground the model discussed herein.