Impacts of Consensus Protocols and Trade Network Topologies on Blockchain System Performance

Abstract

Blockchain can be viewed as a public ledger maintained collectively by a large number of participators based on consensus protocol. We are interested in how di erent consensus protocols and trade network topologies a ect the performance of a blockchain system, which has not been studied in the literature yet. In this paper, we proposed an agent-basedmodel consisting ofmultiple trader andminer agents, and one system agent. We investigated three consensus protocols, namely proof-of-work (PoW), proof-of-stake (PoS), and delegated proof-of-stake (DPoS).We also examined three common trade network topologies: random, small-world, and scale-free. We find that both consensus protocol and trade network topology can impact the performance of blockchain system. PoS and DPoS are generally better than PoW in terms of increasing trade e iciency and equalizing wealth. Besides, scale-free trade network is not favorable because its trade e iciency is quite low, which moderates the price fluctuation and wealth inequality. Since connectivity inequality determines trade e iciency and wealth inequality, it is crucial to increase the connectivity among participants by means of not only using better consensus protocols such as PoS or DPoS, but also incentivizing apathetic or newly-joined participants to link with others. We suggest that our findings could be useful to the designers, practitioner and researchers of blockchain system and token economy.