RELATIONSHIPS BETWEEN BLOCKCHAIN CONSENSUS PARAMETERS AND NETWORK EXTERNALITIES

Abstract

Large-scale decentralized networks have many advantageous fault tolerance properties over their centralized counterparts. These properties enable resiliency in the face of faulty, and even adversarial behavior. Consensus protocols are a way to coordinate state across these networks and are what makes them extremely robust to adversaries. This paper investigates the effectiveness of different consensus protocol designs by examining various questions about the relationships between blockchain consensus parameters and network externalities. In this research we develop a linear regression model to estimate which characteristics of blockchains are associated with the highest levels of byzantine fault tolerance. This quantitative research provides evidence for whether there are statistically significant relationships between aspects of blockchain design and voting power centralization. Finally, we explore what key network metrics are used by node operators in the decision making process to participate in the mining process.