Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Pricing Security in Proof-of-Work Systems   A key component of security in decentralized blockchains is proof of
opportunity cost among block producers. In the case of proof-of-work (PoW),
currently used by the most prominent systems, the cost is due to spent
computation. In this paper, we characterize the security investment of miners
in terms of its cost in fiat money. This enables comparison of security
allocations across PoW blockchains that generally use different PoW algorithms
and reward miners in different cryptocurrency units. We prove that there exists
a unique allocation equilibrium, depending on market prices only, that is
achieved by both strategic miners (who contemplate the actions of others) and
by miners seeking only short-term profit. In fact, the latter will unknowingly
compensate for any attempt to deliberately shift security allocation away from
equilibrium.
  Our conclusions are supported analytically through the development of a
Markov decision process, game theoretical analysis, and derivation of no
arbitrage conditions. We corroborate those results with empirical evidence from
more than two years of blockchain and price data. Overall agreement is strong.
We show that between January 1, 2018 and August 1, 2020, market prices
predicted security allocation between Bitcoin and Bitcoin Cash with error less
than 0.6%. And from the beginning of October 2019, until August 1, 2020, market
prices predicted security allocation between Bitcoin and Litecoin with error of
0.45%. These results are further corroborated by our establishment of
Granger-causality between change in market prices and change in security
allocation.
  To demonstrate the practicality of our results, we describe a trustless
oracle that leverages the equilibrium to estimate the price ratios of PoW
cryptocurrencies from on-chain information only.

32
The categories of this paper are: atom-ph
30
The categories of this paper are: q-alg
26
The categories of this paper are: bayes-an
8
The categories of this paper are: hep-ex
31
The categories of this paper are: ao-sci
35
The categories of this paper are: mtrl-th
25
The categories of this paper are: patt-sol
27
The categories of this paper are: comp-gas
18
The categories of this paper are: econ
16
The categories of this paper are: stat
10
The categories of this paper are: q-bio
2
The categories of this paper are: math
5
The categories of this paper are: gr-qc
17
The categories of this paper are: q-fin
6
The categories of this paper are: astro-ph
22
The categories of this paper are: chao-dyn