Transaction fee mechanism for Proof-of-Stake protocol
Wenpin Tang, David D. Yao

TL;DR
This paper extends a transaction fee mechanism for proof-of-stake blockchains by incorporating a long-run utility model for miners, revealing a utility discontinuity issue, and proposing a modified mechanism that satisfies key incentive and security properties.
Contribution
It introduces a new utility-based analysis of the BSP mechanism, identifies a critical utility discontinuity, and proposes a modified mechanism with parameters ensuring all desired properties.
Findings
Derived an explicit long-run utility function for miners.
Identified a utility discontinuity causing failure of $c$-SCP.
Proposed a modified BSP mechanism satisfying all incentive and security properties.
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 proposed in Chung and Shi (where is a key parameter in the strict -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 mechanism will fail a key desired property in TFM, -side…
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Taxonomy
TopicsBlockchain Technology Applications and Security · Auction Theory and Applications · Cryptography and Data Security
