Cryptocurrency Egalitarianism: A Quantitative Approach
This addresses the need for a rigorous measure of fairness in cryptocurrency design, which is incremental as it builds on existing critiques of consensus mechanisms.
The paper tackles the problem of quantifying egalitarianism in cryptocurrencies by providing the first quantitative definition and measuring it for popular coins like Bitcoin, Ethereum, Litecoin, Monero, Ouroboros, and Decred, showing that ASIC-resistance increases egalitarianism and stake-based protocols can be perfectly egalitarian under certain parameters.
Since the invention of Bitcoin one decade ago, numerous cryptocurrencies have sprung into existence. Among these, proof-of-work is the most common mechanism for achieving consensus, whilst a number of coins have adopted "ASIC-resistance" as a desirable property, claiming to be more "egalitarian,"S where egalitarianism refers to the power of each coin to participate in the creation of new coins. While proof-of-work consensus dominates the space, several new cryptocurrencies employ alternative consensus, such as proof-of-stake in which block minting opportunities are based on monetary ownership. A core criticism of proof-of-stake revolves around it being less egalitarian by making the rich richer, as opposed to proof-of-work in which everyone can contribute equally according to their computational power. In this paper, we give the first quantitative definition of a cryptocurrency's \emph{egalitarianism}. Based on our definition, we measure the egalitarianism of popular cryptocurrencies that (may or may not) employ ASIC-resistance, among them Bitcoin, Ethereum, Litecoin, and Monero. Our simulations show, as expected, that ASIC-resistance increases a cryptocurrency's egalitarianism. We also measure the egalitarianism of a stake-based protocol, Ouroboros, and a hybrid proof-of-stake/proof-of-work cryptocurrency, Decred. We show that stake-based cryptocurrencies, under correctly selected parameters, can be perfectly egalitarian, perhaps contradicting folklore belief.