Promoting Cooperative Strategies on Proof-of-Work Blockchain

Abstract

A proof-of-work blockchain adopts an incentive-driven design to encourage people to participate in the network. Miners provide computing resources and services in exchange for incentives such as static block rewards and transaction fees collected from blockchain users. However, our findings suggest that the current reward scheme may not encourage miners to process user transactions. A non-cooperative strategy that submits a block with no transaction can be more rewarded than a cooperative strategy. As a consequence, the non-cooperative strategy can prevail over the cooperative strategy, decrease the system throughput, and distort credit distribution. We particularly choose Ethereum project as a subject since it is a general-purpose smart contract platform. By investigating the past two years of its ledger history, we find network propagation and block processing delays are the most significant factors that cause miners to choose the non-cooperative strategy. From this finding, we develop a more accurate statistical model for a block discovery time, as well as a reward matrix. We then derive the condition that either strategy has no additional gain, which also helps to estimate whether the transaction fee is underpriced or not. Simulation results show that the non-cooperative strategy is no longer dominant under the revised reward scheme.