Adversarial procurement in blockchains

TL;DR

This paper explores the design of blockchain protocols that incentivize costly computational tasks using mechanism design, balancing economic costs and adversarial behaviors to optimize performance.

Contribution

It formalizes the mechanism design problem for adversarial, pseudonymous environments and characterizes optimal protocols and equilibria, providing practical design insights.

Findings

Optimal protocol loss scales logarithmically with liveness fault cost.

Optimal design often involves a single random node as primary and a fallback committee.

Negative payments (slashing) are beneficial in certain regimes.

Abstract

An emerging blockchain protocol design pattern leverages the asymmetry between the computational effort in performing versus verifying tasks. For example, cryptographic validity proofs (e.g., SNARKS) require the prover to expend significant effort demonstrating the correctness of their claim, while the verifiers benefit from extremely easy validation. The operationalization of this paradigm requires efficiently soliciting the performance of expensive tasks in pseudonymous, adversarial environments. We formalize this as a mechanism design question. The protocol balances the economic cost of a liveness fault, where the work is not completed, with the payments required to incentivize specific behavior from candidate suppliers. We show that the loss of the optimal protocol scales logarithmically in the cost of a liveness fault, scaled up by the adversarial fraction of the network. Further, we find that the optimal equilibria have an intuitive structure, allowing us to provide concrete advice to practitioners. Specifically, in many regimes, the optimum designates a single, random node as the primary worker and a committee as a fallback, which is reminiscent of leader-based consensus mechanisms. We also characterize the asymptotic regimes where having negative payments (i.e., slashing in blockchain parlance) is especially helpful.