The Economics of the Bitcoin Payment System
summary
Model treats Bitcoin as a decentralized marketplace where miners earn revenue by including transactions and mining rewards, blocks arrive as a Poisson process roughly every 10 minutes, and block capacity (e.g. blocks ~1 MB) fixes throughput. Entry by many small miners makes miners price-takers, so users bid for priority and fees explode as congestion rises (below 50% utilization fees are negligible; near 90% delays spike). Proposal: adjust block rate or size to target stable congestion and stabilize dollar-denominated miner revenue.
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chapters (12)
- 0:00Intro
- 1:10Motivation
- 7:34How is Bitcoin Different
- 10:56Firm vs Monopolist
- 18:32Bitcoin Model
- 22:46Benchmarking
- 24:17Miners
- 30:26Transaction Fees
- 32:36General Statistics
- 37:56Design flaws
- 39:46Alternative design
- 42:01Mining gap
