With the development of smart cities, not only are all corners of the city connected to each other, but also connected from city to city. They form a large distributed network together, which can facilitate the integration of distributed energy station (DES) and corresponding smart aggregators. Nevertheless, because of potential security and privacy protection arisen from trustless energies trading, how to make such energies trading goes smoothly is a tricky challenge. In this paper, we propose a blockchain-based multiple energies trading (B-MET) system for secure and efficient energies trading by executing a smart contract we design. Because energies trading requires the blockchain in B-MET system to have high throughput and low latency, we design a new byzantine-based consensus mechanism (BCM) based on node's credit to improve efficiency for the consortium blockchain under the B-MET system. Then, we take combined heat and power (CHP) system as a typical example that provides distributed energies. We quantify their utilities, and model the interactions between aggregators and DESs in a smart city by a novel multi-leader multi-follower Stackelberg game. It is analyzed and solved by reaching Nash equilibrium between aggregators, which reflects the competition between aggregators to purchase energies from DESs. In the end, we conduct plenty of numerical simulations to evaluate and verify our proposed model and algorithms, which demonstrate their correctness and efficiency completely.
Venkata Sriram Siddhardh Nadendla, Lav R. Varshney
Blockchain systems often employ proof-of-work consensus protocols to validate and add transactions into hashchains. These protocols stimulate competition among miners in solving cryptopuzzles (e.g. SHA-256 hash computation in Bitcoin) in exchange for a monetary reward. Here, we model mining as an all-pay auction, where miners' computational efforts are interpreted as bids, and the allocation function is the probability of solving the cryptopuzzle in a single attempt with unit (normalized) computational capability. Such an allocation function captures how blockchain systems control the difficulty of the cryptopuzzle as a function of miners' computational abilities (bids). In an attempt to reduce mining costs, we investigate designing a mining auction mechanism which induces a logit equilibrium amongst the miners with choice distributions that are unilaterally decreasing with costs at each miner. We show it is impossible to design a lenient allocation function that does this. Specifically, we show that there exists no allocation function that discourages miners to bid higher costs at logit equilibrium, if the rate of change of difficulty with respect to each miner's cost is bounded by the inverse of the sum of costs at all the miners.
To implement a blockchain, we need a blockchain protocol for all the nodes to follow. To design a blockchain protocol, we need a block publisher selection mechanism and a chain selection rule. In Proof-of-Stake (PoS) based blockchain protocols, block publisher selection mechanism selects the node to publish the next block based on the relative stake held by the node. However, PoS protocols, such as Ouroboros v1, may face vulnerability to fully adaptive corruptions. In this paper, we propose a novel PoS-based blockchain protocol, QuickSync, to achieve security against fully adaptive corruptions while improving on performance. We propose a metric called block power, a value defined for each block, derived from the output of the verifiable random function based on the digital signature of the block publisher. With this metric, we compute chain power, the sum of block powers of all the blocks comprising the chain, for all the valid chains. These metrics are a function of the block publisher's stake to enable the PoS aspect of the protocol. The chain selection rule selects the chain with the highest chain power as the one to extend. This chain selection rule hence determines the selected block publisher of the previous block. When we use metrics to define the chain selection rule, it may lead to vulnerabilities against Sybil attacks. QuickSync uses a Sybil attack resistant function implemented using histogram matching. We prove that QuickSync satisfies common prefix, chain growth, and chain quality properties and hence it is secure. We also show that it is resilient to different types of adversarial attack strategies. Our analysis demonstrates that QuickSync performs better than Bitcoin by an order of magnitude on both transactions per second and time to finality, and better than Ouroboros v1 by a factor of three on time to finality.
Game theory is often used as a tool to analyze decentralized systems and their properties, in particular, blockchains. In this note, we take the opposite view. We argue that blockchains can and should be used to implement economic mechanisms because they can help to overcome problems that occur if trust in the mechanism designer cannot be assumed. Mechanism design deals with the allocation of resources to agents, often by extracting private information from them. Some mechanisms are immune to early information disclosure, while others may heavily depend on it. Some mechanisms have to randomize to achieve fairness and efficiency. Both issues, information disclosure, and randomness require trust in the mechanism designer. If there is no trust, mechanisms can be manipulated. We claim that mechanisms that use randomness or sequential information disclosure are much harder, if not impossible, to audit. Therefore, centralized implementation is often not a good solution. We consider some of the most frequently used mechanisms in practice and identify circumstances under which manipulation is possible. We propose a decentralized implementation of such mechanisms, that can be, in practical terms, realized by blockchain technology. Moreover, we argue in which environments a decentralized implementation of a mechanism brings a significant advantage.
The property of proportional representation in approval-based committee elections has appeared in the social choice literature for over a century, and is typically understood as avoiding the underrepresentation of minorities. However, we argue that the security of some distributed systems is directly linked to the opposite goal of avoiding the overrepresentation of any minority, a goal not previously formalized that leads us to an optimization objective known as maximin support. After providing a thorough analysis of the computational complexity of this objective, we propose a new efficient election rule that simultaneously achieves a) a constant-factor approximation guarantee for it, and b) the property of proportional justified representation (PJR) - one of the strongest forms of proportional representation. However, the most striking feature of the new rule is that one can verify in linear time that the winning committee satisfies the two aforementioned guarantees, even when the algorithm is executed by an untrusted party who only communicates the output. As a result, the rule can be adapted into a verifiable computing scheme. Moreover, its verification procedure easily admits parallel processing for further efficiency. Our work is motivated by an application on blockchain networks that implement Nominated Proof-of-Stake, where the community elects a committee of validators to participate in the consensus protocol, and where preventing overrepresentation protects the network against attacks by an adversarial minority. Our election rule enables a validator selection protocol with formal guarantees on security and proportionality, and its adaptation as a verifiable computing scheme with a parallelized verification proves to be key for its successful implementation given the computationally limited nature of the blockchain architecture.
Maher Alharby, Roben Castagna Lunardi, Amjad Aldweesh, Aad van Moorsel
In proof-of-work based blockchains such as Ethereum, verification of blocks is an integral part of establishing consensus across nodes. However, in Ethereum, miners do not receive a reward for verifying. This implies that miners face the Verifier's Dilemma: use resources for verification, or use them for the more lucrative mining of new blocks? We provide an extensive analysis of the Verifier's Dilemma, using a data-driven model-based approach that combines closed-form expressions, machine learning techniques and discrete-event simulation. We collect data from over 300,000 smart contracts and experimentally obtain their CPU execution times. Gaussian Mixture Models and Random Forest Regression transform the data into distributions and inputs suitable for the simulator. We show that, indeed, it is often economically rational not to verify, in particular for miners with less hashing power. We consider two approaches to mitigate the implications of the Verifier's Dilemma, namely parallelization and active insertion of invalid blocks, both will be shown to be effective.
Blockchain governance is a subject of ongoing research and an interdisciplinary view of blockchain governance is vital to aid in further research for establishing a formal governance framework for this nascent technology. In this paper, the position of blockchain governance within the hierarchy of Institutional governance is discussed. Blockchain governance is analyzed from the perspective of IT governance using Nash equilibrium to predict the outcome of different governance decisions. A payoff matrix for blockchain governance is created and simulation of different strategy profiles is accomplished for computation of all Nash equilibria. The paper elaborates upon payoff matrices for different kinds of blockchain governance, which are used in the proposition of novel mathematical formulae usable to predict the best governance strategy that minimizes the occurrence of a hard fork as well as predicts the behavior of the majority during protocol updates. The paper also includes validation of the proposed formulae using real Ethereum data.
The combined cooling, heating and power (CCHP) system is a typical distributed, electricity-gas integrated energy scheme in a community. First, it generates electricity by use of gas, and then exploits the waste heat to supply community with heat and cooling. In this paper, we consider a smart city consisting of a number of communities (CCHPs) and an agent of power grid (APG), where CCHPs can sell energy to the APG according to its bid. To study all utilities of entities in such a city from energy trading, a noncooperative Stackelberg game between APG and CCHPs is formulated. Here, the APG gives a bid for buying the energy from CCHPs, then CCHPs respond to the APG with their optimal energy supply that maximizing their utilities according to this bid. We show that the maximum profit to the APG and utilities to the CCHPs can be obtained at the Stackelberg equilibrium, which is guaranteed to exist and unique. Because the complete information about energy supply of each CCHP is unknown to the APG in advance, we propose a distributed algorithm that is able to find the point of equilibrium through a limited number of iterations. Taking privacy protection and transaction security into consideration, we design a blockchain-enabled energy management system. This system is composed of Internet of Energy (IoE) sub-system and blockchain sub-system, where the information interactions as well as energy transactions between APG and CCHPs can be carried out effectively and safely. Finally, security analysis and numerical simulations show the effectiveness and accuracy of our proposed mechanism.
We conduct a systematic study on the light client of permissionless blockchains, in the setting where the full nodes and the light clients are rational. Under such a game-theoretic model, we design a superlight-client protocol to enable a client to employ some relaying full nodes (e.g. two or one) to read the blockchain. The protocol is "generic", i.e., it can be deployed disregarding the underlying consensuses, and also "superlight", i.e., the computational cost of the light client to predicate the (non)existence of a transaction in the blockchain becomes a small constant. Since our protocol resolves a fundamental challenge of broadening the usage of blockchain technology, it captures a wide variety of important use-cases such as multi-chain wallets, DApp browsers and more.
A blockchain, such as Bitcoin, is an append-only, secure, transparent, distributed ledger. A fair blockchain is expected to have healthy metrics; high honest mining power, low processing latency, i.e., low wait times for transactions and stable price of consumption, i.e., the minimum transaction fee required to have a transaction processed. As Bitcoin matures, the influx of transactions increases and the block rewards become insignificant. We show that under these conditions, it becomes hard to maintain the health of the blockchain. In Bitcoin, under these mature operating conditions (MOC), the miners would find it challenging to cover their mining costs as there would be no more revenue from merely mining a block. It may cause miners not to continue mining, threatening the blockchain's security. Further, as we show in this paper using simulations, the cost of acting in favor of the health of the blockchain, under MOC, is very high in Bitcoin, causing all miners to process transactions greedily. It leads to stranded transactions, i.e., transactions offering low transaction fees, experiencing unreasonably high processing latency. To make matters worse, a compounding effect of these stranded transactions is the rising price of consumption. Such phenomena not only induce unfairness as experienced by the miners and the users but also deteriorate the health of the blockchain. We propose BitcoinF transaction processing protocol, a simple, yet highly effective modification to the existing Bitcoin protocol to fix these issues of unfairness. BitcoinF resolves these issues of unfairness while preserving the ability of the users to express urgency and have their transactions prioritized.
Daniel J. Moroz, Daniel J. Aronoff, Neha Narula, David C. Parkes
Proof-of-Work mining is intended to provide blockchains with robustness against double-spend attacks. However, an economic analysis that follows from Budish (2018), which considers free entry conditions together with the ability to rent sufficient hashrate to conduct an attack, suggests that the resulting block rewards can make an attack cheap. We formalize a defense to double-spend attacks. We show that when the victim can counterattack in the same way as the attacker, this leads to a variation on the classic game-theoretic War of Attrition model. The threat of this kind of counterattack induces a subgame perfect equilibrium in which no attack occurs in the first place.
The blockchain concept forms the backbone of a new wave technology that promises to be deployed extensively in a wide variety of industrial and societal applications. Governments, financial institutions, banks, industrial supply chains, service companies, and even educational institutions and hospitals are investing in a substantial manner in the hope of improving business efficiency and operational robustness through deployment of blockchain technology. This thesis work is concerned with designing trustworthy business-to-business (B2B) market platforms drawing upon blockchain technology and game theory. The proposed platform is built upon three key ideas. First, we use permissioned blockchains with smart contracts as a technically sound approach for building the B2B platform. The blockchain deploys smart contracts that govern the interactions of enterprise buyers and sellers. Second, the smart contracts are designed using a rigorous analysis of a repeated game model of the strategic interactions between buyers and sellers. We show that such smart contracts induce honest behavior from buyers and sellers. Third, we embed cryptographic regulation protocols into the permissioned blockchain to ensure that business sensitive information is not revealed to the competitors. We believe our work is an important step in the direction of building a powerful B2B platform that maximizes social welfare and enables trusted collaboration between strategic enterprise agents.
Despite the popularity and practical applicability of blockchains, there is very limited work on the theoretical foundation of blockchains: The lack of rigorous theory and analysis behind the curtain of blockchains has severely staggered its broader applications. This paper attempts to lay out a theoretical foundation for a specific type of blockchains---the ones requiring basic authenticity from the participants, also called \textit{permissioned blockchain}. We formulate permissioned blockchain systems and operations into a game-theoretical problem by incorporating constraints implied by the wisdom from distributed computing and Byzantine systems. We show that in a noncooperative blockchain game (NBG), a Nash equilibrium can be efficiently found in a closed-form even though the game involves more than two players. Somewhat surprisingly, the simulation results of the Nash equilibrium implies that the game can reach a stable status regardless of the number of Byzantine nodes and trustworthy players. We then study a harder problem where players are allowed to form coalitions: the coalitional blockchain game (CBG). We show that although the Shapley value for a CBG can be expressed in a more succinct form, its core is empty.
Scalability and security problems of the centralized architecture models in cyberphysical systems have great potential to be solved by novel blockchain based distributed models.A decentralized energy trading system takes advantage of various sources and effectively coordinates the energy to ensure optimal utilization of the available resources. It achieves that goal by managing physical, social and business infrastructures using technologies such as Internet of Things (IoT), cloud computing and network systems. Addressing the importance of blockchain-enabled energy trading in the context of cyberphysical systems, this article provides a thorough overview of the P2P energy trading and the utilization of blockchain to enhance the efficiency and the overall performance including the degree of decentralization, scalability and the security of the systems. Three blockchain based energy trading models have been proposed to overcome the technical challenges and market barriers for better adoption of this disruptive technology.
This paper compares mathematical models for automated market makers including logarithmic market scoring rule (LMSR), liquidity sensitive LMSR (LS-LMSR), constant product/mean/sum, and others. It is shown that though LMSR may not be a good model for Decentralized Finance (DeFi) applications, LS-LMSR has several advantages over constant product/mean based automated market makers. However, LS-LMSR requires complicated computation (i.e., logarithm and exponentiation) and the cost function curve is concave. In certain DeFi applications, it is preferred to have computationally efficient cost functions with convex curves to conform with the principle of supply and demand. This paper proposes and analyzes constant circle/ellipse based cost functions for automated market makers. The proposed cost functions are computationally efficient (only requires multiplication and square root calculation) and have several advantages over widely deployed constant product cost functions. For example, the proposed market makers are more robust against front-runner (slippage) attacks.
Consider a set of parties invited to execute a protocol $Î $. The protocol will incur some cost to run while in the end (or at regular intervals), it will populate and update local tables that assign (virtual) rewards to participants. Each participant aspires to offset the costs of participation by these virtual payoffs that are provided in the course of the protocol. In this setting, we introduce and study a notion of coalition-safe equilibrium. In particular, we consider a strategic coalition of participants that is centrally coordinated and potentially deviates from $Î $ with the objective to increase its utility with respect to the view of {\em at least one} of the other participants. The protocol $Î $ is called a coalition-safe equilibrium with virtual payoffs (EVP) if no such protocol deviation exists. We apply our notion to study incentives in blockchain protocols. We proceed to use our framework to provide a unified picture of incentives in the Bitcoin blockchain, for absolute and relative rewards based utility functions, as well as prove novel results regarding incentives of the Fruitchain blockchain protocol [PODC 2017] showing that the equilibrium condition holds for collusions up to $n-1$ players for absolute rewards based utility functions and less than $n/2$ for relative rewards based utility functions, with the latter result holding for any "weakly fair" blockchain protocol, a new property that we introduce and may be of independent interest.
Though voting-based consensus algorithms in blockchain outperform proof-based ones in energy- and transaction-efficiency, they are prone to incur wrong elections and bribery elections. The former originates from the uncertainties of candidates’ capability and availability, and the latter comes from the egoism of voters and candidates. Hence, in this paper, we propose an uncertainty- and collusion-proof voting consensus mechanism, including the selection pressure-based voting algorithm and the trustworthiness evaluation algorithm. The first algorithm can decrease the side effects of candidates’ uncertainties, lowering wrong elections while trading off the balance between efficiency and fairness in voting miners. The second algorithm adopts an incentive-compatible scoring rule to evaluate the trustworthiness of voting, motivating voters to report true beliefs on candidates by making egoism consistent with altruism so as to avoid bribery elections. A salient feature of our work is theoretically analyzing the proposed voting consensus mechanism by the large deviation theory. Our analysis provides not only the voting failure rate of a candidate but also its decay speed. The voting failure rate measures the incompetence of any candidate from a personal perspective by voting, based on which the concepts of the effective selection valve and the effective expectation of merit are introduced to help the system designer determine the optimal voting standard and guide a candidate to behave in an optimal way for lowering the voting failure rate.
The pool-hopping attack casts down the expected profits of both the mining pool and honest miners in Blockchain. The mainstream countermeasures, namely PPS (pay-per-share) and PPLNS (pay-per-last-N-share), can hedge pool hopping, but pose a risk to the pool as well as the cost to miners. In this study, we apply the zero-determinant (ZD) theory to design a novel pooled mining which offers an incentive mechanism for motivating non-memorial and memorial evolutionary miners not to switch in pools strategically. In short, our hopping-proof pooled mining has three unique features: 1) fee-free. No fee is charged if the miner does not hop. 2) wide applicability. It can be employed in both prepaid and postpaid mechanisms. 3) fairness. Even the pool can dominate the game with any miner, he has to cooperate when the miner does not hop among pools. The fairness of our scheme makes it have long-term sustainability. To the best of our knowledge, we are the first to propose a hopping-proof pooled mining with the above three natures simultaneously. Both theoretical and experimental analyses demonstrate the effectiveness of our scheme.
This position paper presents a synthesis viewpoint of blockchains from two orthogonal perspectives: fault-tolerant distributed systems and game theory. Specifically, we formulate a new game-theoretical problem in the context of blockchains and sketch a closed-form Nash equilibrium to the problem.
Blockchain technology has evolved as a promising means to transform data management models in many domains including healthcare, agricultural research, tourism domains etc. In the research community, a usable blockchain-based system can allow users to create a proof of ownership and provenance of the research work, share research data without losing control and ownership of it, provide incentives for sharing and give users full transparency and control over who access their data, when and for what purpose. The initial adoption of such blockchain-based systems is necessary for continued use of the services, but their user acceptance behavioral model has not been well investigated in the literature. In this paper, we take the Technology Acceptance Model (TAM) as a foundation and extend the external constructs to uncover how the perceived ease of use, perceived usability, quality of the system and perceived enjoyment influence the intention to use the blockchain-based system. We based our study on user evaluation of a prototype of a blockchain-based research data sharing framework using a TAM validated questionnaire. Our results show that, overall, all the individual constructs of the behavior model significantly influence the intention to use the system while their collective effect is found to be insignificant. The quality of the system and the perceived enjoyment have stronger influence on the perceived usefulness. However, the effect of perceived ease of use on the perceived usefulness is not supported. Finally, we discuss the implications of our findings.
Zeta Avarikioti, Lioba Heimbach, Yuyi Wang, Roger Wattenhofer
Payment channels were introduced to solve various eminent cryptocurrency scalability issues. Multiple payment channels build a network on top of a blockchain, the so-called layer 2. In this work, we analyze payment networks through the lens of network creation games. We identify betweenness and closeness centrality as central concepts regarding payment networks. We study the topologies that emerge when players act selfishly and determine the parameter space in which they constitute a Nash equilibrium. Moreover, we determine the social optima depending on the correlation of betweenness and closeness centrality. When possible, we bound the price of anarchy. We also briefly discuss the price of stability.
Michael Neuder, Daniel J. Moroz, Rithvik Rao, David C. Parkes
Proof-of-Stake consensus protocols give rise to complex modeling challenges. We analyze the Babylon update (October 2019) to the Proof-of-Stake protocol on the Tezos blockchain, and demonstrate that, under certain conditions, rational participants are incentivized to behave dishonestly. In doing so, we provide a theoretical analysis of the feasibility and profitability of a block stealing attack that we call selfish endorsing, a concrete instance of an attack previously only theoretically considered. We propose and analyze a simple change to the Tezos protocol which significantly reduces the (already small) profitability of this dishonest behavior, and introduce a new delay and reward scheme that is provably secure against length-1 and length-2 selfish endorsing attacks. Our framework provides a template for analyzing other Proof-of-Stake protocols for the possibility of selfish behavior.
We define and analyze three mechanisms for getting common knowledge, a posteriori truths about the world onto a blockchain in a decentralized setting. We show that, when a reasonable economic condition is met, these mechanisms are individually rational, incentive compatible, and decide the true outcome of valid oracle queries in both the non-cooperative and cooperative settings. These mechanisms are based upon repeated games with two classes of players: queriers who desire to get common knowledge truths onto the blockchain and a pool of reporters who posses such common knowledge. Presented with a new oracle query, reporters have an opportunity to report the truth in return for a fee provided by the querier. During subsequent oracle queries, the querier has an opportunity to punish any reporters who did not report truthfully during previous rounds. While the set of reporters has the power to cause the oracle to lie, they are incentivized not to do so.
Proof of Work (PoW) is a Sybil-deterrence security mechanism. It introduces an external cost to a system by requiring computational effort to perform actions. However, since its inception, a central challenge was to tune this cost. Initial designs for deterring spam email and DoS attacks applied overhead equally to honest participants and attackers. Requiring too little effort did not deter attacks, whereas too much encumbered honest participation. This might be the reason it was never widely adopted. Nakamoto overcame this trade-off in Bitcoin by distinguishing desired from malicious behavior and introducing internal rewards for the former. This solution gained popularity in securing cryptocurrencies and using the virtual internally-minted tokens for rewards. However, in existing blockchain protocols the internal rewards fund (almost) the same value of external expenses. Thus, as the token value soars, so does the PoW expenditure. Bitcoin PoW, for example, already expends as much electricity as Colombia or Switzerland. This amount of resource-guzzling is unsustainable and hinders even wider adoption of these systems. In this work we present Hybrid Expenditure Blockchain (HEB), a novel PoW mechanism. HEB is a generalization of Nakamoto's protocol that enables tuning the external expenditure by introducing a complementary internal-expenditure mechanism. Thus, for the first time, HEB decouples external expenditure from the reward value. We show a practical parameter choice by which HEB requires significantly less external consumption compare to Nakamoto's protocol, its resilience against rational attackers is similar, and it retains the decentralized and permissionless nature of the system. Taking the Bitcoin ecosystem as an example, HEB cuts the electricity consumption by half.