Pool mining is a common way to reduce income variance for miners in Proof of Work Cryptocurrencies. A vast majority of mining does happen in pools, where a popular scheme to distribute rewards is Pay per last N Shares (PPLNS). In PPLNS and related schemes, miners are frequently making decisions whose rewards are not immediate and will only manifest in the future. This implies that models of inter-temporal utility are relevant when considering the incentives of miners. We show that when including these features of human behaviour in models of rational pool miners, the conditions that lead to decentralisation are hampered because larger pools may be more attractive to miners. We present a new game theoretical model of PPLNS where rational miners have time preferences. In this setup, the incentives of miners to work for a pool depend on the initial distribution of power between mining pools, as well as the specific details of how time is discounted. Agents jumping to larger pools face a trade-off between reducing the expected payoff from their shares in their current pool, or getting faster rewards in the future by joining a larger pool. We consider a case where pools of different mining power have the same size of reward window N. According to our study, in equilibrium larger pools have a tendency to accumulate a disproportionate share of the network power at the expense of smaller pools. This outcome is prevalent over a large range of realistic model parameters. Our model shows that PPLNS may be harmful to the decentralised governance of cryptocurrencies. A way to ameliorate these negative effects, is to encourage pools to have diverse window sizes, or use different reward mechanisms. Doing this in a decentralised fashion is an open challenge.
Afiya Ayman, Amna Aziz, Mohammad Amin Alipour, Áron Lászka
Blockchain based platforms are emerging as a transformative technology that can provide reliability, integrity, and auditability without trusted entities. One of the key features of these platforms is the trustworthy decentralized execution of general-purpose computation in the form of smart contracts, which are envisioned to have a wide range of applications from finance to the Internet of Things. As a result, a rapidly growing and active community of smart contract developers has emerged in recent years. A number of research efforts have investigated the technological challenges that smart contract developers face. However, very little is known about the community itself, about the developers, and about the issues that they discuss and care about. To address this gap, we study the online community of smart contract developers on Stack Overflow. We provide insight into the topics that they discuss, their technological and demographic background, and their awareness of security issues and tools. Our results show that the community of smart contract developers is very active and growing rapidly, in comparison with the general user population. However, a large fraction of smart contract related questions remain unanswered, which can pose a real threat to the viability of a sustainable community and may indicate gaps in community knowledge. Further, we observe very limited discussion of security related topics, which is concerning since smart contracts in practice are plagued by security issues.
Ηλίας Κουτσουπιάς, Philip Lazos, Foluso Ogunlana, Paolo Serafino
We study the strategic implications that arise from adding one extra option to the miners participating in the bitcoin protocol. We propose that when adding a block, miners also have the ability to pay forward an amount to be collected by the first miner who successfully extends their branch, giving them the power to influence the incentives for mining. We formulate a stochastic game for the study of such incentives and show that with this added option, smaller miners can guarantee that the best response of even substantially more powerful miners is to follow the expected behavior intended by the protocol designer.
Robert Norvill, Beltran Fiz, Radu State, Andréa Cullen
Ethereum smart contracts have become common enough to warrant the need for standards to ensure ease of use. The most well known standard was created for the emerging token ecosystem and the exchanges serving it: the ERC20 standard. In this work we use the function selectors present in Ethereum smart contract bytecode to define contract purpose. Contracts are clustered according to the selectors they have. A Reverse look-up from selectors to function names is used to label clusters. We use the function names in clusters to suggest candidates for ERC standardisation.
Philip Daian, Steven Goldfeder, Tyler Kell, Yunqi Li · 8 authors
Blockchains, and specifically smart contracts, have promised to create fair and transparent trading ecosystems. Unfortunately, we show that this promise has not been met. We document and quantify the widespread and rising deployment of arbitrage bots in blockchain systems, specifically in decentralized exchanges (or "DEXes"). Like high-frequency traders on Wall Street, these bots exploit inefficiencies in DEXes, paying high transaction fees and optimizing network latency to frontrun, i.e., anticipate and exploit, ordinary users' DEX trades. We study the breadth of DEX arbitrage bots in a subset of transactions that yield quantifiable revenue to these bots. We also study bots' profit-making strategies, with a focus on blockchain-specific elements. We observe bots engage in what we call priority gas auctions (PGAs), competitively bidding up transaction fees in order to obtain priority ordering, i.e., early block position and execution, for their transactions. PGAs present an interesting and complex new continuous-time, partial-information, game-theoretic model that we formalize and study. We release an interactive web portal, http://frontrun.me/, to provide the community with real-time data on PGAs. We additionally show that high fees paid for priority transaction ordering poses a systemic risk to consensus-layer security. We explain that such fees are just one form of a general phenomenon in DEXes and beyond---what we call miner extractable value (MEV)---that poses concrete, measurable, consensus-layer security risks. We show empirically that MEV poses a realistic threat to Ethereum today. Our work highlights the large, complex risks created by transaction-ordering dependencies in smart contracts and the ways in which traditional forms of financial-market exploitation are adapting to and penetrating blockchain economies.
Increased interest in scalable and high-throughput blockchains has led to an explosion in the number of committee selection methods in the literature. Committee selection mechanisms allow consensus protocols to safely select a committee, or a small subset of validators that is permitted to vote and verify a block of transactions, in a distributed ledger. There are many such mechanisms, each with substantially different methodologies and guarantees on communication complexity, resource usage, and fairness. In this paper, we illustrate that, despite these implementation-level differences, there are strong statistical similarities between committee selection mechanisms. We concretely show this by proving that the committee selection of the Avalanche consensus protocol can be used to choose committees in the Stellar Consensus Protocol that satisfy the necessary and sufficient conditions for Byzantine agreement. We also verify these claims using simulations and numerically observe sharp phase transitions as a function of protocol parameters. Our results suggest the existence of a "statistical taxonomy" of committee selection mechanisms in distributed consensus algorithms.
This article presents WekaCoin, a peer-to-peer cryptocurrency based on a new distributed consensus protocol called Proof-of-Learning. Proof-of-learning achieves distributed consensus by ranking machine learning systems for a given task. The aim of this protocol is to alleviate the computational waste involved in hashing-based puzzles and to create a public distributed and verifiable database of state-of-the-art machine learning models and experiments.
Open access
Blockchain Technology Applications and Security
Advanced Steganography and Watermarking Techniques
The aim of this work is to study the use of decentralization and smart contracts on blockchain networks. We investigate the implementation and use of smart contracts on the platforms Bitcoin, Ethereum and Hyperledger Fabric. Additionally, we have researched consensus algorithms and their respective uses, mentioning both advantages and disadvantages where necessary. To conclude, there is an example contract that is meant to be a close to direct translation of a generic legal house rental contract to show how a legal contract can be translated.
The terms governing the provision of supplies, services, or works by an economic operator to a governmental entity are set into a public contract that is signed, following a procurement process. This article explores whether the public administration can utilise smart contracts to incorporate the terms governing the provision of supplies, services, or works. The fundamental elements of a contract are assessed, in order to determine whether a smart contract can be considered as fulfilling these requirements. Following this assessment, the main hurdles to the use of smart contracting are examined and a possible solution proposed. The case for utilising smart contracting within the realm of public procurement is finally advocated.
Yackolley Amoussou-Guenou, Bruno Biais, Maria Potop-Butucaru, Sara Tucci-Piergiovanni
In this paper we analyze from the game theory point of view Byzantine Fault Tolerant blockchains when processes exhibit rational or Byzantine behavior. Our work is the first to model the Byzantine-consensus based blockchains as a committee coordination game. Our first contribution is to offer a game-theoretical methodology to analyse equilibrium interactions between Byzantine and rational committee members in Byzantine Fault Tolerant blockchains. Byzantine processes seek to inflict maximum damage to the system, while rational processes best-respond to maximise their expected net gains. Our second contribution is to derive conditions under which consensus properties are satisfied or not in equilibrium. When the majority threshold is lower than the proportion of Byzantine processes, invalid blocks are accepted in equilibrium. When the majority threshold is large, equilibrium can involve coordination failures , in which no block is ever accepted. However, when the cost of accepting invalid blocks is large, there exists an equilibrium in which blocks are accepted iff they are valid.
We showcase our approach to verify off-chained information using Linked Data, Smart Contracts, and RDF graph hashes stored on a Distributed Ledger. In this demo, we present our implementation and a use case from the supply chain domain.
Nylig lansert åpen kildekode blokkjede mellomvareteknologi kalt Chainlink har gjort det mulig å enkelt kombinere og koble smarte kontrakter sammen med eksterne systemer med varierende grad av sikkerhet og pålitelighet. Måten dette oppnås på er ved å koble de smarte kontraktene sammen med flere tredjeparter eller ”orakler” som tilbyr tjenesten å knytte smart kontrakten til det eksterne\nsystemet.\n\nDenne oppgaven tar for seg om det er etterspørsel for og hvordan kunstig intelligens kan bli solgt til og kombinert i smarte konrakter på en måte som minimerer behovet for tillit. For å gjøre dette blir markedet og økosystemet rundt Chainlink nettverket beskrevet. Ulike orakeltyper i Chainlink nettverket blir identifisert og det blir identifisert at det ikke er et umiddelbar mulighet å selge til kunstig intelligens til smarte kontrakter i dag på grunn av at teknologien fortsatt er umoden og nødvendig infrastruktur fortsatt mangler.\n\nVidere så blir det identifisert flere måter å kombinere smarte kontrakter med kunstig intelligens ved hjelp av orakler og at det finnes måter hvor kravet til tillit er minimalt. For å motivere leseren blir det gitt eksempler på bruksområder for kunstig intelligens og smarte kontrakter i introduksjonskapittelet og disse blir gjenbesøkt senere i oppgaven hvor de relateres opp mot kombinasjonene av kunstig intelligens og smarte kontrakter som er funnet.
Amjad Saeed Khan, Yogachandran Rahulamathavan, Bokamoso Basutli, Gan Zheng · 6 authors
Physical layer security (PLS) is considered as a promising technique to prevent information eavesdropping in wireless systems. In this context, cooperative relaying has emerged as a robust solution for achieving PLS due to multipath diversity and relatively lower transmission power. However, relays or the relay operators in the practical environment are unwilling for service provisioning unless they are incentivized for their cost of services. Thus, it is required to jointly consider network economics and relay cooperation to improve system efficiency. In this paper, we consider the problem of joint network economics and PLS using cooperative relaying and jamming. Based on the double auction theory, we model the interaction between transmitters seeking for a particular level of secure transmission of information and relay operators for suitable relay and jammer assignment, in a multiple source-destination networks. In addition, theoretical analyses are presented to justify that the proposed auction mechanism satisfies the desirable economic properties of individual rationality, budget balance, and truthfulness. As the participants in the traditional centralized auction framework may take selfish actions or collude with each other, we propose a decentralized and trustless auction framework based on blockchain technology. In particular, we exploit the smart contract feature of blockchain to construct a completely autonomous framework, where all the participants are financially enforced by smart contract terms. The security properties of the proposed framework are also discussed.
Smart contracts on a blockchain network can be implemented to control digital value. A key question that arises is the extent to which smart contracts can, or should, operate as "smart legal contracts". Simply put, can smart contracts meet requirements of validity at law and practical efficacy. In order to achieve the goal of value maximization, the efforts of policy-makers, standards organisations and regulators should be informed by first principles. Standards, and other regulatory activities, must be driven by consideration of the technolegal functions of contracting. Blockchain-based smart contracts offer the potential to reduce transaction costs through new methods of stateful computation. When applied to commercial transactions, smart contracts can represent enforcement of an executed state. This paper argues that distributed ledger and smart contracts standards should seek to provide sufficient flexibility to facilitate contracting parties to coordinate in an optimal manner.
Dominik Harz, Lewis Gudgeon, Arthur Gervais, William J. Knottenbelt
Financial deposits are fundamental to the security of cryptoeconomic protocols as they serve as insurance against potential misbehaviour of agents. However, protocol designers and their agents face a trade-off when choosing the deposit size. While substantial deposits might increase the protocol security, for example by minimising the impact of adversarial behaviour or risks of currency fluctuations, locked-up capital incurs opportunity costs. Moreover, some protocols require over-collateralization in anticipation of future events and malicious intentions of agents. We present Balance, an application-agnostic system that reduces over-collateralization without compromising protocol security. In Balance, malicious agents receive no additional utility for cheating once their deposits are reduced. At the same time, honest and rational agents increase their utilities for behaving honestly as their opportunity costs for the locked-up deposits are reduced. Balance is a round-based mechanism in which agents need to continuously perform desired actions. Rather than treating agents' incentives and behaviour as ancillary, we explicitly model agents' utility, proving the conditions for incentive compatibility. Balance improves social welfare given a distribution of honest, rational, and malicious agents. Further, we integrate Balance with a cross-chain interoperability protocol, XCLAIM, reducing deposits by 10% while maintaining the same utility for behaving honestly. Our implementation allows any number of agents to be maintained for at most 55,287 gas (ca. USD 0.07) to update all agents' scores, and at a cost of 54,948 gas (ca. USD 0.07) to update the assignment of all agents to layers.
We study optimal smart contract design for monitoring an exchange of an item performed offline. There are two parties, a seller and a buyer. Exchange happens off-chain, but the status update takes place on-chain. The exchange can be verified but with a cost. To guarantee self-enforcement of the smart contract, both parties make a deposit, and the deposits must cover payments made in all possible final states. Both parties have an (opportunity) cost of making deposits. We discuss two classes of contract: In the first, the mechanism only interacts with the seller, while in the second, the mechanism can also interact with the buyer. In both cases, we derive optimal contracts specifying optimal deposits and verification policies. The gains from trade of the first contract are dominated by the second contract, on the whole domain of parameters. However, the first type of contract has the advantage of less communication and, therefore, more flexibility.