1. Evolution of Shares in a Proof-of-Stake Cryptocurrency
- Author
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Fahad Saleh, Ioanid Rosu, Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), and HEC Research Paper Series
- Subjects
Cryptocurrency ,Computer science ,Strategy and Management ,Dirichlet distribution ,Asymptotic distribution ,Asset allocation ,Management Science and Operations Research ,asset allocation ,Proof-of-stake ,symbols.namesake ,Blockchain ,Polya urn ,0502 economics and business ,JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G11 - Portfolio Choice • Investment Decisions ,Economics ,050207 economics ,Protocol (object-oriented programming) ,050208 finance ,martingale ,05 social sciences ,Martingale (betting system) ,cryptocurrency ,Incentive ,symbols ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,JEL: C - Mathematical and Quantitative Methods/C.C6 - Mathematical Methods • Programming Models • Mathematical and Simulation Modeling ,Martingale (probability theory) ,Mathematical economics - Abstract
Do the rich always get richer by investing in a cryptocurrency for which new coins are issued according to a proof-of-stake (PoS) protocol? We answer this question in the negative: Without trading, the investor shares in the cryptocurrency are martingales that converge to a well-defined limiting distribution and, hence, are stable in the long run. This result is robust to allowing trading when investors are risk neutral. Then, investors have no incentive to accumulate coins and gamble on the PoS protocol but weakly prefer not to trade. This paper was accepted by Kay Giesecke, finance.
- Published
- 2019