Management Review ›› 2021, Vol. 33 ›› Issue (11): 324-340.

• Fintech and Blockchain • Previous Articles    

Consensus and Forks of Blockchain:Analysis and Implications of The DAO's Impact on Ethereum

Zhu Xiaowu, Wei Wenshi   

  1. Business School, China University of Political Science and Law, Beijing 100088
  • Received:2020-09-30 Published:2022-01-12

Abstract: Exploring the causal mechanism of consensus and forks is a key issue in blockchain governance. Under emergencies (such as hacker attacks), it is difficult to reach consensus. This paper investigates a failure case (The DAO) of a significant blockchain project and then analyzes how hacker attacks affect the consensus and forks of the blockchain. We set up an economic theoretical framework of the blockchain and establish the equilibrium conditions. From both short-term and long-term perspectives, we explore the causal mechanism of blockchain forks caused by miners' vested interests, blockchain application value judgments and mining difficulty adjustments. Furthermore we discuss the impact of miners' risk aversion and multi-chain mining. Due to the difference of computing power and miners interest demands, the roll back operation hardly leads to consensus. The original chain forks into a high-value, high-difficulty new chain and a low-value, low-difficulty old chain, which destroys the optimal balance of blockchain. Our conclusions deepen the theory of blockchain governance and provide meaningful enlightenments for the development and supervision of blockchain, especially regarding the question of whether the blockchain technology could be adopted by digital currency.

Key words: blockchain governance, consensus, fork, digital economy, equilibrium