Decentralized Common Knowledge Oracles

TL;DR

This paper introduces three decentralized mechanisms for reliably establishing common knowledge on blockchains, ensuring truthful reporting through incentive-compatible repeated game strategies.

Contribution

It proposes novel incentive-compatible mechanisms for decentralized oracles that guarantee truthful outcomes under certain economic conditions.

Findings

Mechanisms are individually rational and incentive compatible.

They reliably determine true outcomes in both non-cooperative and cooperative settings.

Reporters are incentivized to report truthfully to avoid penalties.

Abstract

We define and analyze three mechanisms for getting common knowledge, a posteriori truths about the world onto a blockchain in a decentralized setting. We show that, when a reasonable economic condition is met, these mechanisms are individually rational, incentive compatible, and decide the true outcome of valid oracle queries in both the non-cooperative and cooperative settings. These mechanisms are based upon repeated games with two classes of players: queriers who desire to get common knowledge truths onto the blockchain and a pool of reporters who posses such common knowledge. Presented with a new oracle query, reporters have an opportunity to report the truth in return for a fee provided by the querier. During subsequent oracle queries, the querier has an opportunity to punish any reporters who did not report truthfully during previous rounds. While the set of reporters has the power to cause the oracle to lie, they are incentivized not to do so.