Antitrust Economics of Cryptocurrency Mining

Abstract The development of blockchain-based applications, to date mostly virtual currencies, touches many areas of law and economics. The most well-known applications of public blockchains rely on Proof of Work as a consensus mechanism in which miners compete to solve a cryptographic puzzle. We argue that economic tools for market definition may be adapted to delineate relevant cryptocurrency mining markets. Antitrust law can help to prevent network attacks and exclusion of transactions with lower fees by large miners. When multiple blockchains are part of the same market, the role of network effects in securing the leading position of more established cryptocurrencies can potentially lead to exclusionary behaviour.