On the Philosophy of Bitcoin/Blockchain Technology: Is it a Chaotic, Complex System?
This addresses concerns about financial stability for systems relying on blockchain, but it is incremental as it applies existing complexity measures to a new domain.
The paper investigates whether Bitcoin/blockchain is a complex or chaotic system, finding through Crutchfield's Statistical Complexity measure that it is algorithmically complicated but not a complex system and unlikely to become chaotic.
The philosophy of blockchain technology is concerned, among other things, with blockchain ontology, how it might be characterised, how it is being created, implemented, and adopted, how it operates in the world, and how it evolves over time. This paper concentrates on whether Bitcoin/blockchain can be considered a complex system and, if so, whether it is a chaotic one. Beyond mere academic curiosity, a positive response would raise concerns about the likelihood of Bitcoin/blockchain entering a 2010-Flash-Crash-type of chaotic regime, with catastrophic consequences for financial systems based on it. The paper starts by highlighting the relevant details of the Bitcoin/blockchain ecosystem formed by the blockchain itself, bitcoin end users (payers and payees), capital gains seekers, miners, full nodes maintainers, and developers, and their interactions. Then the Information Theory of Complex Systems is briefly discussed for later use. Finally, the blockchain is investigated with the help of Crutchfield's Statistical Complexity measure. The low non-null statistical complexity value obtained suggests that the blockchain may be considered algorithmically complicated but hardly a complex system and unlikely to enter a chaotic regime.