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Stabilizing Congestion in Decentralized Record-Keepers

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  • Assimakis Kattis
  • Fabian Trottner

Abstract

We argue that recent developments in proof-of-work consensus mechanisms can be used in accordance with advancements in formal verification techniques to build a distributed payment protocol that addresses important economic drawbacks from cost efficiency, scalability and adaptablity common to current decentralized record-keeping systems. We enable the protocol to autonomously adjust system throughput according to a feasibly computable statistic - system difficulty. We then provide a formal economic analysis of a decentralized market place for record-keeping that is consistent with our protocol design and show that, when block rewards are zero, the system admits stable, self-regulating levels of transaction fees and wait-times across varying levels of demand. We also provide an analysis of the various technological requirements needed to instantiate such a system in a commercially viable setting, and identify relevant research directions.

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  • Assimakis Kattis & Fabian Trottner, 2020. "Stabilizing Congestion in Decentralized Record-Keepers," Papers 2005.06093, arXiv.org.
    • Handle: RePEc:arx:papers:2005.06093
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    References listed on IDEAS

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    1. Eric Budish, 2018. "The Economic Limits of Bitcoin and the Blockchain," NBER Working Papers 24717, National Bureau of Economic Research, Inc.
    2. Marcel Thum, 2018. "The Economic Cost of Bitcoin Mining," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(01), pages 43-45, March.
    3. Jacob Leshno & Philipp Strack, 2019. "Bitcoin: An Impossibility Theorem for Proof-of-Work based Protocols," Cowles Foundation Discussion Papers 2204R, Cowles Foundation for Research in Economics, Yale University, revised Nov 2019.
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