The Bitcoin payment system involves two agent types: users that transact with the currency and pay fees and miners in charge of authorizing transactions and securing the system in return for these fees. Two of Bitcoin's challenges are (i) securing sufficient miner revenues as block rewards decrease, and (ii) alleviating the throughput limitation due to a small maximal block size cap. These issues are strongly related as increasing the maximal block size may decrease revenue due to Bitcoin's pay-your-bid approach. To decouple them, we analyze the "monopolistic auction", showing (i) its revenue does not decrease as the maximal block size increases, (ii) it is resilient to an untrusted auctioneer (the miner), and (iii) simplicity for transaction issuers (bidders), as the average gain from strategic bid shading (relative to bidding one's value) diminishes as the number of bids increases.
Bibliographical noteFunding Information:
A preliminary extended abstract of this article appeared in . R. Lavi was partly supported by a Marie-Curie fellowship “Advance-AGT,” by an ARCHES award from the MINERVA Foundation, and by the ISF-NSFC joint research program (Grant No. 2560/17). O. Sattath was supported by ERC Grant No. 280157, by the Israel Science Foundation (personal Grant No. 682/18 and Quantum Technologies and Science Program Grant No. 2137/19), and by the Cyber Security Research Center at Ben-Gurion University. A. Zohar was supported by the Israel Science Foundation (Grant No. 616/13) and by a grant from the HUJI Cyber Security Research Center in conjunction with the Israel National Cyber Bureau (Grant No. 039-9230). Authors’ addresses: R. Lavi, Department of Economics, University of Bath, Claverton Down, Bath BA2 7AY, United Kingdom, and Faculty of Industrial Engineering and Management, Technion–Israel Institute of Technology, Haifa 32000, Israel; email: firstname.lastname@example.org; O. Sattath, Department of Computer Science Ben-Gurion University of the Negev Beer-Sheva, Israel 84105; email: email@example.com; A. Zohar, School of Engineering and Computer Science (Rothberg Building), The Hebrew University of Jerusalem, J. Edmund Safra (Givat Ram) Campus, Jerusalem , Israel 9190416; email: firstname.lastname@example.org. Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than the author(s) must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from email@example.com. © 2022 Copyright held by the owner/author(s). Publication rights licensed to ACM. 2167-8375/2022/05-ART5 $15.00 https://doi.org/10.1145/3530799
© 2022 Copyright held by the owner/author(s). Publication rights licensed to ACM.