Incentive Mechanisms Design for Sustainable Blockchain Storage

Yunshu Liu is currently a Ph.D. student in Information Engineering, at the Chinese University of Hong Kong, supervised by Professor Jianwei Huang and Man Hon Cheung. His current doctoral thesis theme is on the incentive mechanisms design for blockchain systems. His research interests include the field of network economics, game theory, and control theory, with current emphasis on blockchain and its applications.

Miners in blockchain systems suffer from increasing storage costs, insufficiently compensated by the users’ transaction fees. This reduces the incentives for the miners’ participation and may jeopardize the blockchain security. We propose incentive mechanisms to address the storage sustainability issue under heavy-user and light-user settings, respectively. In the heavy-user setting where each user generates many transactions, we model the interactions between the protocol designer, users, and miners as a three-stage Stackelberg game. By characterizing the equilibrium of the game, we find that miners neglect the negative externality in transaction selection cause they are willing to accept insufficient-fee transactions. We further propose a Fee and Waiting Tax (FWT) mechanism that addresses the storage sustainability issue and achieve the unconstrained social optimum. In the light-user setting where each user decides whether to propose one transaction, we propose a three-stage game model and our equilibrium analysis reveals that high-storage-cost miners admit transactions with fees above a time-increasing threshold. We further propose a Fee and Transaction Expiration Time mechanism that can achieve storage sustainability without any social welfare loss. Extensive experiment results demonstrate our proposed mechanisms dominate the current blockchain protocol in both storage sustainability and social welfare. The results also shed light on how different magnitudes of decision-dependent uncertainty affect the demand response decision.