Details

Related name

• National Bureau of Economic Research [Browse]
• Brunnermeier, Markus [Browse]

Series

• Working Paper Series (National Bureau of Economic Research) no. w25407. [More in this series]
• NBER working paper series no. w25407

Summary note

The fundamental problem in digital record-keeping is to establish consensus on an update to a ledger, e.g., a payment. Consensus must be achieved in the presence of faults--situations in which some computers are offline or fail to function appropriately. Traditional centralized record-keeping systems rely on trust in a single entity to achieve consensus. Blockchains decentralize record-keeping, dispensing with the need for trust in a single entity, but some instead build a consensus based on the wasteful expenditure of computational resources (proof-of-work). An ideal method of consensus would be tolerant to faults, avoid the waste of computational resources, and be capable of implementing all individually rational transfers of value among agents. We prove a Blockchain Trilemma: any method of consensus, be it centralized or decentralized, must give up (i) fault-tolerance, (ii) resource-efficiency, or (iii) full transferability.

Notes

December 2018.

Source of description

Print version record

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