Reward Mechanism for Blockchains Using Evolutionary Game Theory

TL;DR

This paper develops a general reward mechanism framework for proof-of-stake blockchains, analyzing participant behavior and the importance of penalties using evolutionary game theory to enhance blockchain security and sustainability.

Contribution

It introduces a novel reward mechanism framework for PoS blockchains and applies evolutionary game theory to analyze participant behavior and the role of penalties.

Findings

Penalties are crucial for maintaining blockchain integrity.

Evolutionary game theory reveals how participant strategies evolve.

The framework helps design more robust reward mechanisms.

Abstract

Blockchains have witnessed widespread adoption in the past decade in various fields. The growing demand makes their scalability and sustainability challenges more evident than ever. As a result, more and more blockchains have begun to adopt proof-of-stake (PoS) consensus protocols to address those challenges. One of the fundamental characteristics of any blockchain technology is its crypto-economics and incentives. Lately, each PoS blockchain has designed a unique reward mechanism, yet, many of them are prone to free-rider and nothing-at-stake problems. To better understand the ad-hoc design of reward mechanisms, in this paper, we develop a reward mechanism framework that could apply to many PoS blockchains. We formulate the block validation game wherein the rewards are distributed for validating the blocks correctly. Using evolutionary game theory, we analyze how the participants' behaviour could potentially evolve with the reward mechanism. Also, penalties are found to play a central role in maintaining the integrity of blockchains.