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

Ergo Hackathon: Crowdfunded Smart Contract Pools Research and Conceptualization

This is team SmartPools’ submission for the first Ergo Hackathon. It suggests that Ergo lacks the decentralization, and focus on regular people that it was designed for, and presents a potential solution for these problems in laying the framework for crowdfunded smart contract pools compatible with non-outsourceabilty. It should allow for pool formation with a greater level of decentralization than previously possible by including metrics for diminishing returns on over-contributing hash power to pools with data gathered from Ergo Oracles. This work is informal and preliminary. Further research is required to formalize this work and attempt to provide functional proof for its arguments; readers are highly encouraged to read the included references, and their references, for greater clarity

Latus Incentive Scheme: Enabling Decentralization in Blockchains based on Recursive SNARKs

In the Zendoo whitepaper we introduced a novel SNARK-based construction that allows Bitcoin-like blockchains to create and communicate with sidechains of different types without knowing their internal structure. We also introduced a specific construction, called Latus, allowing creation of fully verifiable sidechains. In the paper we omitted a detailed description of an incentive scheme for Latus that is an essential element of a real decentralized system. This paper fills the gap by introducing details of the incentive scheme for the Latus sidechain. The represented ideas can also be adopted by other SNARK-based blockchains to incentivize decentralized proofs creation

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

How to Rationally Select Your Delegatee in PoS

This paper centers around a simple yet crucial question for everyday users: How should one choose their delegated validators within proof-of-stake (PoS) protocols, particularly in the context of Ethereum 2.0? This has been a long-overlooked gap, as existing studies have primarily focused on inter-committee (validator set) behaviors and activities, while neglecting the dynamic formation of committees, especially for individual stakeholders seeking reliable validators. Our study bridges this gap by diving into the delegation process (normal users delegate their small-value tokens to delegatees who later act as validators) before entering an actual consensus phase. We propose a Bayesian model to quantify normal users' trust in delegatees, which we further incorporate into a game-theoretical model to simulate users' reactions against a set of critical factors identified through extensive research (including 10+ staking service provider as well as 30+ PoS blockchains). Our results reveal that users tend to choose their delegatees and utilize their tokens by carefully weighing the delegation cost, the behaviors of other users, and the reputation of delegatees, ultimately reaching a Nash equilibrium. Unfortunately, the collective trend significantly increases the likelihood of token concentration on a small number of delegatees

The Generals’ Scuttlebutt: Byzantine-Resilient Gossip Protocols

One of the most successful applications of peer-to-peer communication networks is in the context of blockchain protocols, which—in Satoshi Nakamoto\u27s own words—rely on the nature of information being easy to spread and hard to stifle. Significant efforts were invested in the last decade into analyzing the security of these protocols, and invariably the security arguments known for longest-chain Nakamoto-style consensus use an idealization of this tenet. Unfortunately, the real-world implementations of peer-to-peer gossip-style networks used by blockchain protocols rely on a number of ad-hoc attack mitigation strategies that leave a glaring gap between the idealized communication layer assumed in formal security arguments for blockchains and the real world, where a wide array of attacks have been showcased. In this work we bridge this gap by presenting a Byzantine-resilient network layer for blockchain protocols. For the first time we quantify the problem of network-layer attacks in the context of blockchain security models, and we develop a design that thwarts resource restricted adversaries. Importantly, we focus on the proof-of-stake setting due to its vulnerability to Denial-of-Service (DoS) attacks stemming from the well-known deficiency (compared to the proof-of-work setting) known as nothing at stake. We present a Byzantine-resilient gossip protocol, and we analyze it in the Universal Composition framework. In order to prove security, we show novel results on expander properties of random graphs. Importantly, our gossip protocol can be based on any given bilateral functionality that determines a desired interaction between two adjacent peers in the networking layer and demonstrates how it is possible to use application-layer information to make the networking-layer resilient to attacks. Despite the seeming circularity, we demonstrate how to prove the security of a Nakamoto-style longest-chain protocol given our gossip networking functionality, and hence, we demonstrate constructively how it is possible to obtain provable security across protocol layers, given only bare-bone point-to-point networking, majority of honest stake, and a verifiable random function