Do the Bitcoin’s Scaling Solutions Work? An Empirical Analysis of Segwit Policy Change
Most cryptocurrencies are blockchain-enabled payment platforms that use a peer-to-peer network to process transactions without any trusted intermediaries. As cryptocurrencies gain popularity, these blockchain platforms face many limitations on scalability and efficiency. To address these limitations, the blockchain community introduces new policies that aim to provide better experiences to their users. These policies—often introduced without a central planner—can directly affect the platforms’ stakeholders, such as service providers, customers of these services, and miners. In this study, we investigate how one of these policies, known as Segregated witness scheme (Segwit), impacts transaction quality. There are three aspects: (i) First, the introduction of Segwit in the Bitcoin system. (ii) Second, only some service providers may implement compatible technology. (iii) Third, only some transactions adopt (i.e., use) the Segwit features after implementation. Our study primarily focuses on the impacts of (i) introducing the policy in the Bitcoin system and (ii) its implementation by service providers on different stakeholders. In addition, we examine the impact of the overall adoption rate on the miners. We find that overall transaction fees are lower after the introduction of Segwit, but the system sees no improvement in delays. Further, the service providers’ implementation of Segwit affects the providers and their customers differently. Specifically, the service providers pay lower fees (and face longer delays) after the implementation, but their customers pay higher fees (and face shorter delays). We also show that the participation of miners reduces as the overall adoption of Segwit grows. We argue that this scalability solution does not provide all benefits because the adoption of Segwit is slow for stakeholders and reduces incentives for miners to participate in the transaction validation process. Our findings have managerial implications on how to bring about policy changes in blockchain-enabled platforms so that all stakeholders can benefit
Year of publication: |
[2023]
|
---|---|
Authors: | Mishra, Sailendra Prasanna ; Qiu, Liangfei ; Kumar, Subodha |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (38 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 18, 2022 erstellt |
Other identifiers: | 10.2139/ssrn.4517755 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014361996
Saved in favorites
Similar items by person
-
Mishra, Sailendra Prasanna, (2019)
-
Detecting Anomalous Online Reviewers : An Unsupervised Approach Using Mixture Models
Kumar, Naveen, (2018)
-
Rivera, Michael, (2019)
- More ...