Cryptography Versus Incentives

Joshua Gans

Chapter Chapter 6 in The Economics of Blockchain Consensus, 2023, pp 85-101 from Springer

Abstract: Abstract This chapter explores the trade-off between using cryptography and incentives in blockchain systems, particularly in the context of smart contracts. Cryptography provides security and permissions, but can limit contract offerings and increase computational costs. Incentives encourage positive behavior, but require access to hidden information. By examining the example of front-running in blockchains with smart contracting layers, the chapter highlights the distinct solutions provided by cryptography and incentives. Ultimately, striking a balance between these two approaches is crucial for ensuring efficient and secure blockchain operations.

Keywords: Cryptography; Incentives; Smart contracts; Front-running; Blockchain security (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-33083-4_6

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