Bitcoin Fee Decisions in Transaction Confirmation Queueing Games Under Limited Multi-Priority Rule

Abstract

In the Bitcoin system, transaction fees serve not only as the fundamental economic incentive to stimulate miners, but also as an important tuner for the Bitcoin system to define the priorities in the transaction confirmation process. In this paper, we aim to study the priority rules for queueing transactions based on their associated fees, and in turn users' decision-making in formulating their fees in the transaction confirmation queueing game. Based on the queueing theory, we first analyzed the waiting time of users under non-preemptive limited multi-priority (LMP) rule, which is formulated to adjust users' waiting time over different priorities. We then established a game-theoretical model, and analyze users' equilibrium fee decisions. Towards the end, we conducted computational experiments to validate the theoretical analysis. Our research findings can not only help understand users' fee decisions under the LMP rule, but also offer useful managerial insights in optimizing the queueing rules of Bitcoin transactions.