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Incentive Mechanism for Rational Miners in Bitcoin Mining Pool

Author

Listed:
  • Gang Xue

    (Nanjing University of Posts and Telecommunications)

  • Jia Xu

    (Nanjing University of Posts and Telecommunications)

  • Hanwen Wu

    (Nanjing University of Posts and Telecommunications)

  • Weifeng Lu

    (Nanjing University of Posts and Telecommunications)

  • Lijie Xu

    (Nanjing University of Posts and Telecommunications)

Abstract

Bitcoin is one of the most popular cryptocurrency in the world. Miners in the Bitcoin network reduce their risks through participating in mining pool. Existing mining pool systems do not consider the cost and strategy of miners. In this paper, we study two mining models: public cost model and private cost model. For the public cost model, we design an incentive mechanism, called Mining game, using a Stackelberg game. We show that Mining game is individually rational, profitable, and has the unique Stackelberg Equilibrium. For the private cost model, we formulate the Budget Feasible Reward Optimization (BFRO) problem to maximize the reward function under the budget constraint, and design a budget feasible reverse auction to solve the BFRO problem, which is computationally efficient, individually rational, truthful, budget feasible, and constant approximate. Through extensive simulations, we evaluate the performance and validate the theoretical properties of our incentive mechanisms.

Suggested Citation

  • Gang Xue & Jia Xu & Hanwen Wu & Weifeng Lu & Lijie Xu, 2021. "Incentive Mechanism for Rational Miners in Bitcoin Mining Pool," Information Systems Frontiers, Springer, vol. 23(2), pages 317-327, April.
    • Handle: RePEc:spr:infosf:v:23:y:2021:i:2:d:10.1007_s10796-020-10019-2
    DOI: 10.1007/s10796-020-10019-2
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    Cited by:

    1. Shouhuai Xu & Moti Yung & Jingguo Wang, 2021. "Seeking Foundations for the Science of Cyber Security," Information Systems Frontiers, Springer, vol. 23(2), pages 263-267, April.

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