The Economic Security of Permissionless Consensus | Jacob Leshno, Chicago Booth

Описание: Abstract: Bitcoin demonstrated the possibility of a financial ledger that operates without the need for a trusted central authority. However, concerns persist regarding its security and considerable energy consumption. We assess the consensus protocols that underpin Bitcoin's functionality, questioning whether they can ensure economically meaningful security while maintaining a permissionless design that allows free entry of operators. We answer this affirmatively by constructing a protocol that guarantees economic security and preserves Bitcoin's permissionless design. This protocol's security does not depend on monetary payments to miners or immense electricity consumption, which our analysis suggests are ineffective. Our framework integrates economic theory with distributed systems theory, and formalizes the role of the protocol's user community.

Link: https://arxiv.org/abs/2409.08951

Bio: Jacob studies market design, using theoretical tools to explore market structures and design effective market rules. His research has been recognized by the ACM SIGecom Test of Time Award and the INFORMS Frederick W. Lanchester Prize. A significant portion of his work focuses on matching markets, such as college admissions and the NRMP medical residency match. His research includes using tractable cutoff characterizations to clarify the structure of these markets and support empirical estimation and design optimization. He also work on cryptocurrencies, Web3, and blockchain technology. This technology allows for a new form of market design in the form of platforms whose rules are given by open-source computer code. His work explores the potential and limitations of these open systems. He taught a PhD class on the economics of distributed systems to bridge computer science theory and economic theory.