A Unified Incentive Framework for Analysing Fees and Rewards in Distributed Ledgers

Abstract

The rapid advancements in distributed ledger technology (DLT) have produced novel systems combining high throughput, low latency and smart contract programmability. However, designing robust incentives schemes for such advanced protocols remains a critical challenge. Weaknesses in existing incentives schemes, particularly in reward distribution and incentive alignment, can hinder protocol adoption and long-term sustainability. In this paper, we propose a unified framework for comprehensive analysis of a wide range of DLTs. Our framework extends existing methodologies for studying transaction fee mechanisms by incorporating reward distribution among multiple actors involved in the consensus process, addressing critical gaps in the literature. We introduce a categorisation of incentive mechanisms and apply the above framework to the modern consensus protocols of Sui and IOTA, offering comparisons with more ‘traditional’ systems including Ethereum and Bitcoin.