Bruno Biais, Christophe Bisière, Matthieu Bouvard, and Catherine Casamatta, The blockchain folk theorem, IDEI Working Paper, n. 873, May 2017, revised November 2017.


Blockchains are distributed ledgers, operated within peer-to-peer networks. If reliable and stable, they could offer a new, cost effective, way to record transactions and asset ownership, but are they? We model the blockchain as a stochastic game and analyse the equilibrium strategies of rational, strategic miners. We show that mining the longest chain is a Markov perfect equilibrium, without forking on the equilibrium path, in line with the seminal vision of Nakamoto (2008). We also clarify, however, that the blockchain game is a coordination game, which opens the scope for multiple equilibria. We show there exist equilibria with forks, leading to orphaned blocks and also possibly to persistent divergence between different chains.

Research partnership

Fédération des Banques Françaises Research Initiative