Oceanic Games: Centralization Risks and Incentives in Blockchain Mining

To participate in the distributed consensus of permissionless blockchains, prospective nodes -- or miners -- provide proof of designated, costly resources. However, in contrast to the intended decentralization, current data on blockchain mining unveils increased concentration of these resources in a few major entities, typically mining pools. To study strategic considerations in this setting, we employ the concept of Oceanic Games, Milnor and Shapley (1978). Oceanic Games have been used to analyze decision making in corporate settings with small numbers of dominant players (shareholders) and large numbers of individually insignificant players, the ocean. Unlike standard equilibrium models, they focus on measuring the value (or power) per entity and per unit of resource} in a given distribution of resources. These values are viewed as strategic components in coalition formations, mergers and resource acquisitions. Considering such issues relevant to blockchain governance and long-term sustainability, we adapt oceanic games to blockchain mining and illustrate the defined concepts via examples. The application of existing results reveals incentives for individual miners to merge in order to increase the value of their resources. This offers an alternative perspective to the observed centralization and concentration of mining power. Beyond numerical simulations, we use the model to identify issues relevant to the design of future cryptocurrencies and formulate prospective research questions.Comment: [Best Paper Award] at the International Conference on Mathematical Research for Blockchain Economy (MARBLE 2019

Incentive compatible and anti-compounding of wealth in proof-of-stake

Geometric reward function is proposed as an alternative choice to circumvent the problem of compounding. However, it’s not so desirable since no parties have incentives to participate in the consensus mechanism. In this paper, we tailor a new bonus reward function by adding random salts to the geometric reward function. The new reward function is a tradeoff between equitablity and incentive compatibility. We conclude that the quitability of the new reward function is optimal compared with others. Beyond that, we present Gini coefficients to fine-evaluate euqitability of reward functions. We propose a new metric (aka. reward ratio) to quantify the level of incentive compatibility. Our simulation results show that the new reward function performs better than others in both incentive compatibility and anti-compounding

Optimizing the Resource Consumption of Blockchain Technology in Business Systems

Background: Blockchain technology has gained a great public interest due to the appearance of cryptocurrencies, a digital asset used for exchanging funds. Although blockchain calculations offer the benefits of security and reduced costs, blockchain is still strongly criticised for its lack of usefulness and resource-heavy consumption. Objectives: The aim of this research is to provide different insights into blockchain technology and to propose NP-complete problems as a suitable alternative to the current consensus algorithm. Methods/approach: This research discusses the current state of proposed alternatives, projects such as distributed volunteering for scientific purposes and different consensus algorithms within cryptocurrencies but focusing on incorporating NP-complete problems as a secondary, more useful option. Results: Using the properties of NP-complete problems, it is possible to solve various problems in different areas, such as science, biology, medicine and finance, but also to improve business processes, optimize markets, payments and supply chains while decreasing environmental costs. Conclusions: This paper shows that the alternative mechanisms are being developed and used to substitute an existing Blockchain algorithm with a more efficient one. It also suggests further investigation in this area because the alternatives greatly improve blockchain’s usability and efficiency

SoK: Consensus in the Age of Blockchains

The core technical component of blockchains is consensus: how to reach agreement among a distributed network of nodes. A plethora of blockchain consensus protocols have been proposed---ranging from new designs, to novel modifications and extensions of consensus protocols from the classical distributed systems literature. The inherent complexity of consensus protocols and their rapid and dramatic evolution makes it hard to contextualize the design landscape. We address this challenge by conducting a systematization of knowledge of blockchain consensus protocols. After first discussing key themes in classical consensus protocols, we describe: (i) protocols based on proof-of-work; (ii) proof-of-X protocols that replace proof-of-work with more energy-efficient alternatives; and (iii) hybrid protocols that are compositions or variations of classical consensus protocols. This survey is guided by a systematization framework we develop, to highlight the various building blocks of blockchain consensus design, along with a discussion on their security and performance properties. We identify research gaps and insights for the community to consider in future research endeavours