Transaction fee mechanism for Proof-of-Stake protocol

Wenpin Tang and David D. Yao

Papers from arXiv.org

Abstract: We study a mechanism design problem in the blockchain proof-of-stake (PoS) protocol. Our main objective is to extend the transaction fee mechanism (TFM) recently proposed in Chung and Shi (SODA, p.3856-3899, 2023), so as to incorporate a long-run utility model for the miner into the burning second-price auction mechanism $\texttt{BSP}(\gamma)$ proposed in Chung and Shi (where $\gamma$ is a key parameter in the strict $\gamma$-utility model that is applied to both miners and users). First, we derive an explicit functional form for the long-run utility of the miner using a martingale approach, and reveal a critical discontinuity of the utility function, namely a small deviation from being truthful will yield a discrete jump (up or down) in the miner's utility. We show that because of this discontinuity the $\texttt{BSP}(\gamma)$ mechanism will fail a key desired property in TFM, $c$-side contract proofness ($c$-SCP). As a remedy, we introduce another parameter $\theta$, and propose a new $\texttt{BSP}(\theta)$ mechanism, and prove that it satisfies all three desired properties of TFM: user- and miner-incentive compatibility (UIC and MIC) as well as $c$-SCP, provided the parameter $\theta$ falls into a specific range, along with a proper tick size imposed on user bids.

Date: 2023-08, Revised 2023-08
New Economics Papers: this item is included in nep-cta, nep-des, nep-pay and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://arxiv.org/pdf/2308.13881 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2308.13881

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().