  This paper studies to what extent the cost of operating a proof-of-work
blockchain is intrinsically linked to the cost of preventing attacks, and to
what extent the underlying digital ledger security budgets are correlated with
the cryptocurrency market outcomes. We theoretically derive an equilibrium
relationship between the cryptocurrency price, mining rewards and mining costs,
and blockchain security outcomes. Using daily crypto market data for 2014-2021
and employing the autoregressive distributed lag approach - that allows
treating all the relevant moments of the blockchain series as potentially
endogenous - we provide empirical evidence of cryptocurrency price and mining
rewards indeed being intrinsically linked to blockchain security outcomes.
