Designing Redistribution Mechanisms for Reducing Transaction Fees in Blockchains
Sankarshan Damle, Manisha Padala, Sujit Gujar

TL;DR
This paper introduces new redistribution mechanisms for blockchain transaction fee systems that aim to lower user fees while maintaining efficiency and incentive compatibility, despite strategic miner behavior.
Contribution
It proposes robust and rational transaction fee redistribution mechanisms that address the challenges of applying classical mechanisms in blockchain settings.
Findings
TFRMs can reduce transaction fees effectively.
Classical redistribution mechanisms face fundamental limitations in blockchain contexts.
The proposed R-TFRM and R^2-TFRM mechanisms ensure positive rebates and miner rationality.
Abstract
Blockchains deploy Transaction Fee Mechanisms (TFMs) to determine which user transactions to include in blocks and determine their payments (i.e., transaction fees). Increasing demand and scarce block resources have led to high user transaction fees. As these blockchains are a public resource, it may be preferable to reduce these transaction fees. To this end, we introduce Transaction Fee Redistribution Mechanisms (TFRMs) -- redistributing VCG payments collected from such TFM as rebates to minimize transaction fees. Classic redistribution mechanisms (RMs) achieve this while ensuring Allocative Efficiency (AE) and User Incentive Compatibility (UIC). Our first result shows the non-triviality of applying RM in TFMs. More concretely, we prove that it is impossible to reduce transaction fees when (i) transactions that are not confirmed do not receive rebates and (ii) the miner can…
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Taxonomy
TopicsBlockchain Technology Applications and Security · Cloud Computing and Resource Management · FinTech, Crowdfunding, Digital Finance
