Demystifying incentives in the consensus computer

Cryptocurrencies like Bitcoin and the more recent Ethereum system allow users to specify scripts in transactions and contracts to support applications beyond simple cash transactions. In this work, we analyze the extent to which these systems can enforce the correct semantics of scripts. We show that when a script execution requires nontrivial computation effort, practical attacks exist which either waste miners\u27 computational resources or lead miners to accept incorrect script results. These attacks drive miners to an ill-fated choice, which we call the {\em verifier\u27s dilemma}, whereby rational miners are well-incentivized to accept unvalidated blockchains. We call the framework of computation through a scriptable cryptocurrency a consensus computer and develop a model that captures incentives for verifying computation in it. We propose a resolution to the verifier\u27s dilemma which incentivizes correct execution of certain applications, including outsourced computation, where scripts require minimal time to verify. Finally we discuss two distinct, practical implementations of our consensus computer in real cryptocurrency networks like Ethereum

Demystifying digital governance:Exploring the mechanisms and trade-offs of blockchains for organizations

Amid digital transformation, organizations are adopting innovative governance forms to complement or automate existing structures. This dissertation highlights the role of digital governance in facilitating digital exchange relationships within and among organizations. First, a typology of digital governance is introduced, comprising analog, augmented, and automated governance forms, each with distinct control, coordination, incentive, and trust mechanisms. Second, the dissertation explores blockchain technology as a key opportunity to implement digital governance within and among organizations, allowing trustless exchanges between actors, independence from costly intermediaries, and rule-based automation to reach consensus.Within organizations, blockchains create direct information channels between principals and agents, impacting organizational structures in two ways. Vertical disintermediation streamlines structures, resulting in increased cognitive load due to growing information. By contrast, lateral reintermediation introduces new monitoring and incentive mechanisms but sacrifices flexibility for strict lateral sequencing.Among organizations, founders face three pertinent blockchain governance trade-offs: (1) selecting the ideal combination of analog and automated governance mechanisms; (2) maintaining the delicate balance between exerting tight control versus driving network adoption, and; (3) weighing the inherent trade-off between rigidity and dynamism that can arise from deeply engrained founder imprints.Overall, this research contributes to governance literature by defining digital governance as a distinct form, elucidating key mechanisms and trade-offs related to blockchains, and adding valuable insights for both academics and practitioners grappling with digital governance complexities. More broadly, this dissertation contributes to the discussion about digital transformation by shifting the focus from organizational processes and business models to digital governance.<br/

Centrally Banked Cryptocurrencies

Current cryptocurrencies, starting with Bitcoin, build a decentralized blockchain-based transaction ledger, maintained through proofs-of-work that also generate a monetary supply. Such decentralization has benefits, such as independence from national political control, but also significant limitations in terms of scalability and computational cost. We introduce RSCoin, a cryptocurrency framework in which central banks maintain complete control over the monetary supply, but rely on a distributed set of authorities, or mintettes, to prevent double-spending. While monetary policy is centralized, RSCoin still provides strong transparency and auditability guarantees. We demonstrate, both theoretically and experimentally, the benefits of a modest degree of centralization, such as the elimination of wasteful hashing and a scalable system for avoiding double-spending attacks.Comment: 15 pages, 4 figures, 2 tables in Proceedings of NDSS 201

Accountable Safety for Rollups

Accountability, the ability to provably identify protocol violators, gained prominence as the main economic argument for the security of proof-of-stake (PoS) protocols. Rollups, the most popular scaling solution for blockchains, typically use PoS protocols as their parent chain. We define accountability for rollups, and present an attack that shows the absence of accountability on existing designs. We provide an accountable rollup design and prove its security, both for the traditional `enshrined' rollups and for sovereign rollups, an emergent alternative built on lazy blockchains, tasked only with ordering and availability of the rollup data.Comment: 28 pages, 4 figure

Demystifying Patent Holdup

Patent holdup can arise when circumstances enable a patent owner to extract a larger royalty ex post than it could have obtained in an arms length transaction ex ante. While the concept of patent holdup is familiar to scholars and practitioners—particularly in the context of standard-essential patent (SEP) disputes—the economic details are frequently misunderstood. For example, the popular assumption that switching costs (those required to switch from the infringing technology to an alternative) necessarily contribute to holdup is false in general, and will tend to overstate the potential for extracting excessive royalties. On the other hand, some commentaries mistakenly presume that large fixed costs are an essential ingredient of patent holdup, which understates the scope of the problem. In this Article, we clarify and distinguish the most basic economic factors that contribute to patent holdup. This casts light on various points of confusion arising in many commentaries on the subject. Path dependence—which can act to inflate the value of a technology simply because it was adopted first—is a useful concept for understanding the problem. In particular, patent holdup can be viewed as opportunistic exploitation of path dependence effects serving to inflate the value of a patented technology (relative to the alternatives) after it is adopted. This clarifies that factors contributing to holdup are not static, but rather consist in changes in economic circumstances over time. By breaking down the problem into its most basic parts, our analysis provides a useful blueprint for applying patent holdup theory in complex cases