We describe and analyze perishing mining, a novel block-withholding mining strategy that lures profit-driven miners away from doing useful work on the public chain by releasing block headers from a privately maintained chain. We then introduce the dual private chain (DPC) attack, where an adversary that aims at double spending increases its success rate by intermittently dedicating part of its hash power to perishing mining. We detail the DPC attack's Markov decision process, evaluate its double spending success rate using Monte Carlo simulations. We show that the DPC attack lowers Bitcoin's security bound in the presence of profit-driven miners that do not wait to validate the transactions of a block before mining on it.
Blockchain protocols’ main differentiator is their purported decentralization that unlocks various information technology applications that were supposedly impossible beforehand. The key promise is that incentive-driven participation of a large set of interested parties can lead to decentralized protocol states where no single operator can be a “single point of failure.” Despite this promise, there is little systematic analysis of decentralization in blockchain systems and the sporadic theoretic and empirical investigations that exist paint a rather negative picture due to resource “pooling behaviors” that are impossible to prevent in the “permissionless” setting of such protocols where parties have no designated identities.
Xiaotong Sun, Xi Chen, Charalampos Stasinakis, Georgios Sermpinis
Decentralized Autonomous Organization (DAO) provides a decentralized governance solution through blockchain, where decision-making process relies on on-chain voting and follows majority rule. This paper focuses on MakerDAO, and we find three voter coalitions after applying clustering algorithm to voting history. The emergence of a dominant voter coalition is a signal of governance centralization in DAO, and voter coalitions have complicated influence on Maker protocol, which is governed by MakerDAO. This paper presents empirical evidence of multicoalition democracy in DAO and further contributes to the contemporary debate on whether decentralized governance is possible.
Abstract Blockchain is a platform of distributed elaboration, which allows users to provide software for a huge range of next‐generation decentralized applications without involving reliable third parties. Smart contracts (SCs) are an important component in blockchain applications: they are programmatic agreements among two or more parties that cannot be rescinded. Furthermore, SCs have an important characteristic: they allow users to implement reliable transactions without involving third parties. However, the advantages of SCs have a price. Like any program, SCs can contain bugs, some of which may also constitute security threats. Writing correct and secure SCs can be extremely difficult because, once deployed, they cannot be modified. Although SCs have been recently introduced, a large number of approaches have been proposed to find bugs and vulnerabilities in SCs. In this article, we present a systematic literature review on the approaches for the automated detection of bugs and vulnerabilities in SCs. We survey 68 papers published between 2015 and 2020, and we annotate each paper according to our classification framework to provide quantitative results and find possible areas not explored yet. Finally, we identify the open problems in this research field to provide possible directions to future researchers.
Blockchain technology that came with the introduction of Bitcoin offers many powerful use-cases while promising the establishment of distributed autonomous organizations (DAOs) that may transform our current understanding of client-server interactions on the cyberspace. They employ distributed consensus mechanisms that were subject to a lot of research in recent years. While most of such research focused on security and performance of consensus protocols, less attention was given to their incentive mechanisms which relate to a critical feature of blockchains. Unfortunately, while blockchains are advocating decentralized operations, they are not egalitarian due to existing incentive mechanisms. Many current consensus protocols inadvertently incentivize centralization of mining power and inequitable participation. This paper explores and evaluates alternative incentive mechanisms for a more decentralized and equitable participation. We first evaluate inequality in existing Proof of Stake (PoS) based incentive mechanisms, then we examine three alternatives in which rewards scheme is more partial to low-stakeholders. Through simulation, we show that two of our alternative mechanisms can reduce inequality and offer an attractive solution for sustainability of blockchain-based applications and DAOs.
Yield farming represents an immensely popular asset management activity in decentralized finance (DeFi). It involves supplying, borrowing, or staking crypto assets to earn an income in forms of transaction fees, interest, or participation rewards at different DeFi marketplaces. In this systematic survey, we present yield farming protocols as an aggregation-layer constituent of the wider DeFi ecosystem that interact with primitive-layer protocols such as decentralized exchanges (DEXs) and loanable funds (PLFs) protocol for loanable funds (PLF). We examine the yield farming mechanism by first studying the operations encoded in the yield farming smart contracts, and then performing stylized, parameterized simulations on various yield farming strategies. We conduct a thorough literature review on related work, and establish a framework for yield farming protocols that takes into account pool structure, accepted token types, and implemented strategies. Using our framework, we characterize major yield aggregators in the market including Yearn Finance, Beefy, and Badger DAO. Moreover, we discuss anecdotal attacks against yield aggregators and generalize a number of risks associated with yield farming.
Marco Crosara, Luca Olivieri, Fausto Spoto, Fabio Tagliaferro
Abstract Many blockchain applications exchange tokens, such as bitcoin and ether, or implement them through smart contracts. A trend in blockchain is to apply standards for token interoperability, unchanged, from platform to platform, easing the design challenges with trusted and widely-used specifications. However, the exploitation of the target language semantics can result in technological advantages and more efficient contracts. This paper presents a re-engineering of OpenZeppelin’s implementation of the ERC-20 and ERC-721 standards in Takamaka, a Java framework for programming smart contracts. It describes a sound solution to the issue about the types allowed for the token holders and a novel implementation for making snapshots of tokens, based on tree maps, that is possible in Java, but not in Solidity, more efficient than the literal translation in Java from Solidity, within the Java virtual machine. Moreover, it applies to ERC-721 as well, where a snapshot mechanism was previously missing. The same snapshot mechanism can also be applied beyond the smart contracts for tokens.
Benedikt Severin, Marc Hesenius, Florian Blum, Michael Hettmer · 5 authors
Users must pay a fee depending on resource consumption when using smart contracts on the Ethereum blockchain. As even the most basic operations cost several dollars under moderate network load, developers may actively reduce user-paid fees by optimizing the smart contract resource consumption (’gas costs’). Previous works suggested patterns and tools supporting developers in gas cost optimization, but up to now a comprehensive analysis of their real-world impact is missing. Another gap is the maintenance and evolution support for smart contracts leveraging the publicly available usage data. We propose high-level gas cost profiles and review which profiles are considered in the existing literature. Additionally, we sampled around 68,000 smart contract interactions from three years, analyzed them using the gas cost profiles, and compare the findings to the current focus in literature. In our data set, external code, storage, and the transaction base fee are first-level cost drivers in terms of absolute gas usage, but contract deployment becomes also costly when considering the average gas usage per transaction. Our analysis also shows that plenty of previous work focused cost categories barely influencing resource consumption.
Christoph Schlegel, Mateusz Kwaśnicki, Akaki Mamageishvili
We study axiomatic foundations for different classes of constant-function automated market makers (CFMMs). We focus particularly on separability and on different invariance properties under scaling. Our main results are an axiomatic characterization of a natural generalization of constant product market makers (CPMMs), popular in decentralized finance, on the one hand, and a characterization of the Logarithmic Scoring Rule Market Makers (LMSR), popular in prediction markets, on the other hand. The first class is characterized by the combination of independence and scale invariance, whereas the second is characterized by the combination of independence and translation invariance. The two classes are therefore distinguished by a different invariance property that is motivated by different interpretations of the numéraire in the two applications. However, both are pinned down by the same separability property. Moreover, we characterize the CPMM as an extremal point within the class of scale invariant, independent, symmetric AMMs with non-concentrated liquidity provision. Our results add to a formal analysis of mechanisms that are currently used for decentralized exchanges and connect the most popular class of DeFi AMMs to the most popular class of prediction market AMMs.
Jason Milionis, Dean Hirsch, Andy Arditi, Pranav Garimidi
Lately, Non-Fungible Tokens (NFTs), i.e., uniquely discernible assets on a blockchain, have skyrocketed in popularity by addressing a broad audience. However, the typical NFT auctioning procedures are conducted in various, ad hoc ways, while mostly ignoring the context that the blockchain provides, i.e., new possibilities, but at the same time new challenges in auction design. One of the main targets of this work is to shed light on the vastly unexplored design space of NFT Auction Mechanisms, especially in those characteristics that fundamentally differ from traditional and more contemporaneous forms of auctions. We focus on the case that bidders have a valuation for the auctioned NFT, i.e., what we term the single-item NFT auction case. In this setting, we formally define an NFT Auction Mechanism, give the properties that we would ideally like a perfect mechanism to satisfy (broadly known as incentive compatibility and collusion resistance) and prove that it is impossible to have such a perfect mechanism. Even though we cannot have an all-powerful protocol like that, we move on to consider relaxed notions of those properties that we may desire the protocol to satisfy, as a trade-off between implementability and economic guarantees. Specifically, we define the notion of an equilibrium-truthful auction, where neither the seller nor the bidders can improve their utility by acting non-truthfully, so long as the counter-party acts truthfully. We also define asymptotically second-price auctions, in which the seller does not lose asymptotically any revenue in comparison to the theoretically-optimal (static) second-price sealed-bid auction, in the case that the bidders' valuations are drawn independently from some distribution. We showcase why these two are very desirable properties for an auction mechanism to enjoy, and construct the first known NFT Auction Mechanism which provably possesses such formal guarantees.
Christoph Müller-Bloch, Jonas Valbjørn Andersen, Jason Spasovski, Jungpil Hahn
Blockchain systems allow for securely keeping shared records of transactions in a decentralised way. This is enabled by algorithms called consensus mechanisms. Proof-of-work is the most prominent consensus mechanism, but environmentally unsustainable. Here, we focus on proof-of-stake, its best-known alternative. Importantly, decentralised decision-making power is not an inherent feature of blockchain systems, but a technological possibility. Numerous security incidents illustrate that decentralised control cannot be taken for granted. We therefore study how key parameters affect the degree of decentralisation in proof-of-stake blockchain systems. Based on a real-world implementation of a proof-of-stake blockchain system, we conduct agent-based simulations to study how a range of parameters impact decentralisation. The results suggest that high numbers of initial potential validator nodes, large transactions, a high number of transactions, and a very high or very low positive validator network growth rate increase decentralisation. We find weak support for an impact of changes in transaction fees and initial stake distributions. Our study highlights how blockchain challenges our understanding of decentralisation in information systems research, and contributes to understanding the governance mechanisms that lead to decentralisation in proof-of-stake blockchain systems as well as to designing proof-of-stake blockchain systems that are prone to decentralisation and therefore more secure.
Blockchain has emerged to be a pioneer fundamental technology for distributed applications. Not only it is limited to financial sector, but it also has extended in the fields of health & medicare, managing logistics of goods through effective supply chain management etc. Although there are numerous applications of blockchain, cryptocurrencies remains at the top, in terms of popularity and cryptographic security it provides in maintenance of digital assets. Miner(s) in a cryptocurrency is/are an individual/group of individuals who benefit after per-forming Proof-of-Work for validating a transaction. The top two cryptocurrencies according to market cap value are Bitcoin and Ether. Millions of transactions happen on their blockchain on a daily basis, but not all of them result in success. Some are also marked as failed/unconfirmed, even if they are less compared to the confirmed transactions. Some of the reasons for this behavior could be too many transactions present in mempool of miners or insufficient fees is provided as the incentive to the miners of the network. Though the number of transactions that go unconfirmed per day is very small compared to the ones getting confirmed, still the area of failed cryptocurrency transactions remain unexplored. This paper focuses on statistics of failed cryptocurrency transactions, some primary reasons of failure in a cryptocurrency transaction. Furthermore, it also presents existing approaches to minimize the failure of transactions.
Florian Spychiger, Claudio J. Tessone, Liudmila Zavolokina, Gerhard Schwabe
Inspired by an industry initiative to address the celebrated market for lemons (poor-quality used cars), we investigate how incentives for a permissioned blockchain-based system in the automobile ecosystem can be designed to ensure high-quality data storage and use by different stakeholders. The peer-to-peer distributed ledger platform connects organizations and car owners with disparate interests and hidden intentions. While previous literature has chiefly examined incentives for permissionless platforms, we leverage studies about crowdsensing applications to stimulate research on incentives in permissioned blockchains. This article uses the action design research approach to create an incentive system featuring a rating mechanism influenced by data correction measures. Furthermore, we propose relying on certain institutions capable of assessing data generated within the system. This combined approach of a decentralized data correction and an institutionalized data assessment is distinct from similar incentive systems suggested by literature. By using an agent-based model with strategy evolution, we evaluate the proposed incentive system. Our findings indicate that a rating-based revenue distribution leads to markedly higher data quality in the system. Additionally, the incentive system reveals hidden information of the agents and alleviates agency problems, contributing to an understanding of incentive design in inter-organizational blockchain-based data platforms. Furthermore, we explore incentive design in permissioned blockchains and discuss its latest implications.
The importance of honesty among blockchain validators can not be overemphasized, especially as blockchain is used by many as an underlying technology for the development of various Industry 4.0 solutions. In the blockchain consensus process, validators validate the correctness of transactions and propose new blocks for addition to the blockchain. They are rewarded for this task with the blockchain native token (e.g., ETH on the Ethereum blockchain). This reward is often distributed among validators with respect to their staked amount. An increasing number of validators joining the network leads to a decreasing chance of a validator being chosen for the validation task and thus a reduction in the validation reward. This situation results in some form of competition among the validators, leading them to carry out various malicious actions to influence the blockchain validator selection protocol in order to be chosen. In this paper, we examine the competitive interactions between validators in a blockchain consensus process and propose a model using an infinitely repeated game model that ensures that the validators are deterred from behaving maliciously while also encouraging a self-policing notion due to the extra incentive mechanism of an improved reputation score when a validator can verifiably report malicious activities by others. Further, we discuss the factors that can incentivize or disincentivize a validator to either continue to behave honestly or switch to dishonest behavior.
Felix Funk, Franz Teske, Jörg Franke, Christian Heider · 6 authors
The continued proliferation of renewable energy sources (RES) in the residential sector enables private households to increasingly participate in the energy market. However, it also poses an infrastructural challenge as their spatial dispersion and the simultaneity of their energy generation increase the strain on the main grid. Local energy markets (LEMs) have been proposed to amend this effect by leveraging market dynamics to efficiently allocate privately generated energy in the immediate vicinity. Blockchain has been suggested as suitable information technology to reflect and support the decentralization and the parity characteristic of such LEMs. While some research on the topic has been conducted, concerns regarding anonymity in the proposed markets remain. In this study, we hence conceptualize a Blockchain-based LEM which expands on previous designs by introducing a one-time-address-based anonymization technique. The proposed concept also extends the double auction mechanisms of existing LEMs by a sealed offering protocol, providing information symmetry. The concept is prototypically implemented and validated using a Proof of Authority Ethereum network. It is shown that the implementation is sufficiently scalable for proposed LEM sizes.
As massive radio devices being employed in future 6G wireless networks, dynamic spectrum sharing based on cognitive radio and blockchain technologies presents an effective way to maximize spectrum utilization. However, ubiquitous, accurate and timely spectrum sensing is an important prerequisite for dynamic spectrum sharing. How to improve the accuracy and the participation enthusiasm of spectrum sensing are the key research issues. Furthermore, in the practical application of spectrum blockchain, the secure and credible guarantee mechanism of spectrum ledger and the incentive mechanism in spectrum sharing are prominent problems. In this paper, a smart contract-based distributed spectrum sensing scheme is proposed for blockchain-enabled spectrum sharing, which leverages the interaction between spectrum sensing and incentive mechanism for secondary users. In this way, secondary users under favorable channel condition are more likely being selected for spectrum sensing. The performance of mobile sensing is analyzed when performing spectrum sensing based on cycle detection algorithm. On the basis of spectrum sensing, a reputation-based incentive algorithm is employed in the smart contract, recording the spectrum sensing results and rewards so as to enhance the enthusiasm of secondary users and the security of sensing. Simulation shows that more sensing nodes can be employed with the same task budget, while the primary user detection probability can be increased by 19.6% when adopting the proposed scheme with sufficient budget. In addition, when the number of sensing nodes is the same, the proposed incentive method can ensure that the sensing nodes obtain a higher average rewards, which helps to enhance the enthusiasm of secondary users to participate in the spectrum sensing task.
The worldwide targets for carbon-neutral societies increased the penetration of distributed generation and storage. Smart cities now play a key role in achieving these targets by considering the alliances of their demand and supply assets as local citizen energy communities. These communities need to have enough weight to trade electricity in wholesale markets. Trading of electricity can be done in spot markets or by bilateral contracts involving customers and suppliers. This paper is devoted to bilateral contracting, which is modeled as a negotiation process involving an iterative exchange of offers and counter-offers. This article focuses on local citizen energy communities. Specifically, it presents team and single-agent negotiation models, where each member has its sets of strategies and tactics and also its decision model. Community agents are equipped with intra-team strategies and decision protocols. To evaluate the benefits of CECs, models of both coalition formation and management have been adapted. This paper also describes a case study on forward bilateral contracts, involving a retailer agent and three different types of citizen energy communities. The results demonstrate the benefits of CECs during the negotiation of private bilateral contracts of electricity. Furthermore, they also demonstrate that in the case of using a representative strategy, the selection of the mediator may be critical for achieving a good deal.
Abstract In recent decades, the world has witnessed cloud computing as an essential technology that changes the traditional application Development and Operation (DevOps) lifecycle. However, current cloud software DevOps and Service Level Agreement (SLA) management often face challenges of 1) selecting the best fitting service providers, customizing services and planning capacities for large-scale distributed applications; 2) guaranteeing high-quality and trustworthy SLAs among multiple service providers; 3) enhancing the interoperability of cloud services across different providers; and 4) designing effective incentive models among stakeholders. This paper proposes a novel framework called Auction and Witness Enhanced trustworthy SLA for Open, decentralized service MarkEtplaces (AWESOME) to build a trustworthy cloud marketplace and address the above challenges. The proposed framework contains four subsystems: a customizable graphical user interface, an auction-based service selection model, a witness committee management mechanism, and a smart contract factory orchestration. We developed a prototype AWESOME decentralized application (DApp) based on the Ethereum blockchain. Extensive experiments are designed to evaluate the latency and cost of our model. The experimental results demonstrate that our model is economical and feasible.
In this paper, a delegate contract signing solution is proposed to eliminate the potential risk of contract fraud caused by information and interest asymmetry. By utilizing the functional properties of the Ethereum blockchain and smart contracts, a delegate contract signing mechanism is established. By running the mechanism, the delegate contract signing information is received and processed, and the information is broadcast to the blockchain network nodes. By designing the algorithms of "requesting contract signing", "successful contract signing" and "contract fraud dispute resolution", the delegate contract signing is realized. By proposing algorithms and their calling processes, the smart contracts are completed. Finally, the smart contracts based on the solution are tested and verified. The source code of the smart contracts has been published on GitHub.
Benjamin Kraner, Shengnan Li, Andreia Sofia Teixeira, Claudio J. Tessone
Trust is key to the efficient functioning of any fiat or crypto-currency and so is for the consensus algorithm behind the functioning of blockchain systems. By an arbitrary design choice, Bitcoin and most Proof-of- Work (PoW) blockchains have a limited supply. Once block rewards vanish, only transaction fees will remain as an incentive for miners to partake in the verification process. In this paper, we analyse the impact that miners bargaining over block composition has on consensus in the absence of block rewards: in this situation, competing blocks at the same height may be more attractive to peers by including less transactions (i.e. sharing the mempool). The mining and acceptance of blocks can be modelled as an Ulti-matum Game, where miners' strategies represent their fairness sentiment. Extending previous Literature, our study focuses on the effect of the transaction arrival rate on global consensus in the system and whether local consensus is formed under certain assumptions about the strategies of miners. We find that consensus is threatened when the supply of transactions is low and stable consensus only emerges when the amount of unconfirmed transactions remains sufficient. In addition, when miners are set with randomised strategies, it is more difficult for the system to achieve consensus. Our research suggests that transitioning from a block reward incentive to a transaction fee incentive may weaken and even destroy the consensus of PoW-based systems.
Alpesh Bhudia, Anna Cartwright, Edward Cartwright, Julio Hernández-Castro · 5 authors
Cryptocurrencies to date, most notably Bitcoin, have primarily relied on a proof-of-work system to validate and process transactions on the blockchain. Proof-of-work systems have, however, several limitations, such as enormous energy demands, and so are likely to be replaced by proof-of-stake systems. These systems use a mechanism that does not rely on mining power but the amount of stake owned by a node, allowing randomly selected validators to create blocks and verify blocks created by other validators. Proof-of-stake systems naturally result in staking pools where in a third party organisation operates validators on behalf of investors who have staked in the currency. Given they have oversight for a large amount of staked currency, staking pools are a prime target for malicious actors. In this paper we explore the economic implications of an attack on a staking pool. We pay particular attention to how the staking pool and clients could resolve an extortion attack by a malicious actor who has accessed relevant signing keys.
To guarantee delivery of their intended functionalities in the presence of unresponsive parties, current smart-contracts cut users off from being able to commit their responses after a fixed period of time has elapsed. However, current blockchains have limited transaction processing capacities, so a fixed amount of time will not always be sufficient to receive every critical transaction (C-TX). This paper presents a mechanism for adaptive cutoffs (ACs) which ensures that users retain the opportunity to commit C-TXs despite blockchain congestion, and enables early cutoffs when the number of required C-TXs is low. A non-interactive argument system for setting adaptive cutoffs under the current Ethereum Virtual Machine is described. Additionally, disputable cutoffs (DCs) are presented, which are a more efficient approach used in parallel to ACs based on a bisection-based dispute. Furthermore, it’s empirically demonstrated that an AC/DC-enabled smart-contract can receive a larger number of C-TXs than its non-adaptive counterparts when user responsiveness is slowed due to denial of service or congestion.