Miners’ Reward Elasticity and Stability of Competing Proof-of-Work Cryptocurrencies

Proof-of-Work cryptocurrencies employ miners to sustain the system through algorith-mic reward adjustments. We develop a stochastic model of the multicurrency miningand identify conditions for stable transaction speeds. Bitcoin’s algorithm requires hashsupply elasticity ≤1 for stability, while ASERT remains stable for any elasticity andcan be interpreted as a form of stochastic gradient descent. Interactions with othercurrencies can relax Bitcoin’s stability requirements. Using a halving event, we es-timate miners’ hash supply elasticity and conduct counterfactual simulations. Ourfindings reveal Bitcoin’s heavy reliance on low hash supply elasticity and interactionswith smaller cryptocurrencies, urging an algorithm upgrade for stability.