An Incentive-Compatible Semi-Parallel Proof-of-Work Protocol

TL;DR

This paper analyzes existing parallel Proof-of-Work protocols, identifies their incentive vulnerabilities, and proposes a voting-based semi-parallel PoW protocol that enhances security, efficiency, and fairness in blockchain consensus.

Contribution

It introduces a novel semi-parallel PoW protocol that outperforms existing methods in security, throughput, and incentive compatibility, supported by theoretical and simulation analyses.

Findings

Existing parallel PoW protocols are more vulnerable to incentive attacks.

The proposed semi-parallel PoW protocol improves security and efficiency.

The protocol ensures fair transaction fee distribution and resilience against attacks.

Abstract

Parallel Proof-of-Work (PoW) protocols have been suggested in the literature to improve the safety guarantees, transaction throughput and confirmation latencies of Nakamoto consensus. In this work, we first consider the existing parallel PoW protocols and develop hard-coded incentive attack structures. Our theoretical results and simulations show that the existing parallel PoW protocols are more vulnerable to incentive attacks than the Nakamoto consensus, e.g., attacks have smaller profitability threshold and they result in higher relative rewards. Next, we introduce a voting-based semi-parallel PoW protocol that outperforms both Nakamoto consensus and the existing parallel PoW protocols from most practical perspectives such as communication overheads, throughput, transaction conflicts, incentive compatibility of the protocol as well as a fair distribution of transaction fees among the voters and the leaders. We use state-of-the-art analysis to evaluate the consistency of the protocol and consider Markov decision process (MDP) models to substantiate our claims about the resilience of our protocol against incentive attacks.