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Barriers to Collusion-resistant Transaction Fee Mechanisms

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  • Yotam Gafni
  • Aviv Yaish

Abstract

To allocate transactions to blocks, cryptocurrencies use an auction-like transaction fee mechanism (TFM). A conjecture of Roughgarden [44] asks whether there is a TFM that is incentive compatible for both the users and the miner, and is also resistant to off-chain agreements (OCAs) between these parties, a collusion notion that captures the ability of users and the miner to jointly deviate for profit. The work of Chung and Shi [12] tackles the problem using the different collusion resistance notion of side-channel proofness (SCP), and shows an impossibility given this notion. We show that OCA-proofness and SCP are different, with SCP being strictly stronger. We then fully characterize the intersection of deterministic dominant strategy incentive-compatible (DSIC) and OCA-proof mechanisms, as well as deterministic MMIC and OCA-proof ones, and use this characterization to show that only the trivial mechanism is DSIC, myopic miner incentive-compatible (MMIC) and OCA-proof. We also show that a randomized mechanism can be at most 0.842-efficient in the worst case, and that the impossibility of a non-trivial DSIC, MMIC and OCA-proof extends to a couple of natural classes of randomized mechanisms.

Suggested Citation

  • Yotam Gafni & Aviv Yaish, 2024. "Barriers to Collusion-resistant Transaction Fee Mechanisms," Papers 2402.08564, arXiv.org.
    • Handle: RePEc:arx:papers:2402.08564
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    File URL: http://arxiv.org/pdf/2402.08564
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    References listed on IDEAS

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    1. Elijah Fox & Mallesh Pai & Max Resnick, 2023. "Censorship Resistance in On-Chain Auctions," Papers 2301.13321, arXiv.org, revised Jun 2023.
    2. Maryam Bahrani & Pranav Garimidi & Tim Roughgarden, 2023. "Transaction Fee Mechanism Design with Active Block Producers," Papers 2307.01686, arXiv.org, revised Oct 2023.
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