Proof-of-Work Cryptocurrencies: Does Mining Technology Undermine Decentralization?

Does the proof-of-work protocol serve its intended purpose of supporting decentralized cryptocurrency mining? To address this question, we develop a game-theoretical model where miners first invest in hardware to improve efficiency their operations, and then compete for mining rewards rent-seeking game. We argue that because capacity constraints faced by miners, centralization is lower than indicated both public discourse recent academic work. show advancements do not necessarily lead larger increasing advantage, investment new contributes decentralization but rather allow smaller expand enter competition. Our calibrated illustrates has small impact on cost attacking network, while reward significant impact. This highlights vulnerability emerging cryptocurrencies, as well established cryptocurrencies transitioning fee-based scheme.