Transaction Propagation on Permissionless Blockchains: Incentive and Routing Mechanisms

Existing permissionless blockchain solutions rely on peer-to-peer propagation mechanisms, where nodes in a network transfer transaction they received to their neighbors. Unfortunately, there is no explicit incentive for such transaction propagation. Therefore, existing propagation mechanisms will not be sustainable in a fully decentralized blockchain with rational nodes. In this work, we formally define the problem of incentivizing nodes for transaction propagation. We propose an incentive mechanism where each node involved in the propagation of a transaction receives a share of the transaction fee. We also show that our proposal is Sybil-proof. Furthermore, we combine the incentive mechanism with smart routing to reduce the communication and storage costs at the same time. The proposed routing mechanism reduces the redundant transaction propagation from the size of the network to a factor of average shortest path length. The routing mechanism is built upon a specific type of consensus protocol where the round leader who creates the transaction block is known in advance. Note that our routing mechanism is a generic one and can be adopted independently from the incentive mechanism.Comment: 2018 Crypto Valley Conference on Blockchain Technolog

Characterizations of Network Auctions and Generalizations of VCG

With the growth of networks, promoting products through social networks has become an important problem. For auctions in social networks, items are needed to be sold to agents in a network, where each agent can bid and also diffuse the sale information to her neighbors. Thus, the agents' social relations are intervened with their bids in the auctions. In network auctions, the classical VCG mechanism fails to retain key properties. In order to better understand network auctions, in this paper, we characterize network auctions for the single-unit setting with respect to weak budget balance, individual rationality, incentive compatibility, efficiency, and other properties. For example, we present sufficient conditions for mechanisms to be efficient and (weakly) incentive compatible. With the help of these properties and new concepts such as rewards, participation rewards, and so on, we show how to design efficient mechanisms to satisfy incentive compatibility as much as possible, and incentive compatibility mechanisms to maximize the revenue. Our results provide insights into understanding auctions in social networks.Comment: To appear in ECAI 202