  Abrupt changes in the miner hash rate applied to a proof-of-work (PoW)
blockchain can adversely affect user experience and security. Because different
PoW blockchains often share hashing algorithms, miners face a complex choice in
deciding how to allocate their hash power among chains. We present an economic
model that leverages Modern Portfolio Theory to predict a miner's allocation
over time using price data and inferred risk tolerance. The model matches
actual allocations with mean absolute error within 20% for four out of the top
five miners active on both Bitcoin (BTC) and Bitcoin Cash (BCH) blockchains. A
model of aggregate allocation across those four miners shows excellent
agreement in magnitude with the actual aggregate as well a correlation
coefficient of 0.649. The accuracy of the aggregate allocation model is also
sufficient to explain major historical changes in inter-block time (IBT) for
BCH. Because estimates of miner risk are not time-dependent and our model is
otherwise price-driven, we are able to use it to anticipate the effect of a
major price shock on hash allocation and IBT in the BCH blockchain. Using a
Monte Carlo simulation, we show that, despite mitigation by the new difficulty
adjustment algorithm, a price drop of 50% could increase the IBT by 50% for at
least a day, with a peak delay of 100%.
