Economics of Blockchain Storage

Abstract

Miners in a blockchain system are suffering from the ever-increasing storage costs, which in general have not been properly compensated by the users' transaction fees. In the long run, this may lead to less participation of miners and jeopardize the blockchain security. In this paper, we study the economics of blockchain storage and identify the incentive issues related to this storage cost problem. More specifically, we model the interactions among users (who generate transactions) and miners in two stages, where the users set the transaction fees in Stage 1, and the miners select which transactions to include in Stage 2. Through characterizing the Nash equilibrium of the two-stage game, we find that the transaction fees indeed cannot cover the storage costs under the current practice in general, due to the negative externality and the unfair delay-based pricing. We also identify that a longer block interval can alleviate the concern by raising the transactions fees at the expense of larger delay.