10 research outputs found
Bitcoin: An Impossibility Theorem for Proof-of-Work based Protocols
Bitcoinâs main innovation lies in allowing a decentralized system that relies on anonymous, proïŹt driven miners who can freely join the system. We formalize these properties in three axioms: anonymity of miners, no incentives for miners to consolidate, and no incentive to assuming multiple fake identities. This novel axiomatic formalization allows us to characterize which other protocols are feasible: Every protocol with these properties must have the same reward scheme as Bitcoin. This implies an impossibility result for risk-averse miners: no protocol satisïŹes the aforementioned constraints simultaneously without giving miners a strict incentive to merge. Furthermore, any protocol either gives up on some degree of decentralization or its reward scheme is equivalent to Bitcoinâs
JaxNet: Scalable Blockchain Network
Today's world is organized based on merit and value. A single global currency
that's decentralized is needed for a global economy. Bitcoin is a partial
solution to this need, however it suffers from scalability problems which
prevent it from being mass-adopted. Also, the deflationary nature of bitcoin
motivates people to hoard and speculate on them instead of using them for day
to day transactions. We propose a scalable, decentralized cryptocurrency that
is based on Proof of Work.The solution involves having parallel chains in a
closed network using a mechanism which rewards miners proportional to their
effort in maintaining the network.The proposed design introduces a novel
approach for solving scalability problem in blockchain network based on merged
mining.Comment: 55 pages. 10 figure
Stablecoins 2.0: Economic Foundations and Risk-based Models
Stablecoins are one of the most widely capitalized type of cryptocurrency.
However, their risks vary significantly according to their design and are often
poorly understood. We seek to provide a sound foundation for stablecoin theory,
with a risk-based functional characterization of the economic structure of
stablecoins. First, we match existing economic models to the disparate set of
custodial systems. Next, we characterize the unique risks that emerge in
non-custodial stablecoins and develop a model framework that unifies existing
models from economics and computer science. We further discuss how this
modeling framework is applicable to a wide array of cryptoeconomic systems,
including cross-chain protocols, collateralized lending, and decentralized
exchanges. These unique risks yield unanswered research questions that will
form the crux of research in decentralized finance going forward
Musketeer: Incentive-Compatible Rebalancing for Payment Channel Networks
In this work, we revisit the severely limited throughput problem of cryptocurrencies and propose a novel rebalancing approach for Payment Channel Networks (PCNs). PCNs are a popular solution for increasing the blockchain throughput, however, their benefit depends on the overall usersâ liquidity. Rebalancing mechanisms are the state-of-the-art approach to maintaining high liquidity in PCNs. However, existing opt-in rebalancing mechanisms exclude users that may assist in rebalancing for small service fees, leading to suboptimal solutions and under-utilization of the PCNsâ bounded liquidity.
We introduce the first rebalancing approach for PCNs that includes all users, following an âall for one and one for allâ design philosophy that yields optimal throughput. The proposed approach introduces a double-auction rebalancing problem, which we term Musketeer, where users can participate as buyers (paying fees to rebalance) or sellers (charging fees to route transactions). The desired properties tailored to the unique characteristics of PCNs are formally defined, including the novel property of cyclic budget balance that is a stronger variation of strong budget balance. Basic results derived from auction theory, including an impossibility and multiple mechanisms that either achieve all desiderata under a relaxed model or sacrifice one of the properties, are presented. We also propose a novel mechanism that leverages time delays as an additional cost to users. This mechanism is provably truthful, cyclic budget balanced, individually rational, and economic efficient
but only with respect to liquidity