\textsf{HaPPY-Mine}: designing a mining reward function

DOI10.1007/978-3-662-64331-0_13zbMATH Open1497.91348arXiv2103.12229OpenAlexW3208472004MaRDI QIDQ2147246FDOQ2147246

Rajmohan Rajaraman, Lucianna Kiffer

Publication date: 22 June 2022

Abstract: In cryptocurrencies, the block reward is meant to serve as the incentive mechanism for miners to commit resources to create blocks and in effect secure the system. Existing systems primarily divide the reward in proportion to expended resources and follow one of two static models for total block reward: (i) a fixed reward for each block (e.g., Ethereum), or (ii) one where the block reward halves every set number of blocks (e.g., the Bitcoin model of halving roughly every 4 years) but otherwise remains fixed between halvings. In recent work, a game-theoretic analysis of the static model under asymmetric miner costs showed that an equilibrium always exists and is unique. Their analysis also reveals how asymmetric costs can lead to large-scale centralization in blockchain mining, a phenomenon that has been observed in Bitcoin and Ethereum and highlighted by other studies. In this work we introduce a novel family of mining reward functions, HaPPY-Mine (HAsh-Pegged Proportional Yield), which peg the value of the reward to the hashrate of the system, decreasing the reward as the hashrate increases. HaPPY-Mine distributes rewards in proportion to expended hashrate and inherits the safety properties of the generalized proportional reward function. We study HaPPY-Mine under a heterogeneous miner cost model and show that an equilibrium always exists with a unique set of miner participants and a unique total hashrate. Significantly, we prove that a HaPPY-Mine equilibrium is more decentralized than the static model equilibrium under a set of metrics including number of mining participants and hashrate distribution. Finally, we show that any HaPPY-Mine equilibrium is also safe against collusion and sybil attacks, and explore how the market value of the currency affects the equilibrium.

Full work available at URL: https://arxiv.org/abs/2103.12229

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Mathematics Subject Classification ID

Cryptography (94A60) Actuarial science and mathematical finance (91G99)

Cites Work

• But why does it work? A rational protocol design treatment of bitcoin
• Oceanic Games: Centralization Risks and Incentives in Blockchain Mining
• Title not available (Why is that?)

Cited In (1)

• Cryptocurrency is accounting coordination: selfish mining and double spending in a simple mining game

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