A Game-Theoretic Analysis of Shard-Based Permissionless Blockchains

Mohammad Hossein Manshaei; Murtuza Jadliwala; Anindya Maiti; Mahdi Fooladgar

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arXiv · 1809.07307

A Game-Theoretic Analysis of Shard-Based Permissionless Blockchains

Mohammad Hossein Manshaei·Murtuza Jadliwala·Anindya Maiti·Mahdi Fooladgar

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Abstract

Low transaction throughput and poor scalability are significant issues in public blockchain consensus protocols such as Bitcoins. Recent research efforts in this direction have proposed shard-based consensus protocols where the key idea is to split the transactions among multiple committees (or shards), which then process these shards or set of transactions in parallel. Such a parallel processing of disjoint sets of transactions or shards by multiple committees significantly improves the overall scalability and transaction throughout of the system. However, one significant research gap is a lack of understanding of the strategic behavior of rational processors within committees in such shard-based consensus protocols. Such an understanding is critical for designing appropriate incentives that will foster cooperation within committees and prevent free-riding. In this paper, we address this research gap by analyzing the behavior of processors using a game-theoretic model, where each processor aims at maximizing its reward at a minimum cost of participating in the protocol. We first analyze the Nash equilibria in an N-player static game model of the sharding protocol. We show that depending on the reward sharing approach employed, processors can potentially increase their payoff by unilaterally behaving in a defective fashion, thus resulting in a social dilemma. In order to overcome this social dilemma, we propose a novel incentive-compatible reward sharing mechanism to promote cooperation among processors. Our numerical results show that achieving a majority of cooperating processors (required to ensure a healthy state of the blockchain network) is easier to achieve with the proposed incentive-compatible reward sharing mechanism than with other reward sharing mechanisms.

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BibTeX RIS

Mohammad Hossein Manshaei, Murtuza Jadliwala, Anindya Maiti, Mahdi Fooladgar. 2018-09-19. A Game-Theoretic Analysis of Shard-Based Permissionless Blockchains. https://arxiv.org/abs/1809.07307

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