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Maximizing Miner Revenue in Transaction Fee Mechanism Design

Authors Ke Wu , Elaine Shi, Hao Chung

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Author Details

Ke Wu
  • CSD Department, Carnegie Mellon University, Pittsburgh, PA, USA
Elaine Shi
  • ECE and CSD Department, Carnegie Mellon University, Pittsburgh, PA, USA
Hao Chung
  • ECE Department, Carnegie Mellon University, Pittsburgh, PA, USA

Funding

Research supported by NSF awards 2212746, 2044679, 1704788, a Packard Fellowship, a generous gift from the late Nikolai Mushegian, a gift from Google, and an ACE center grant from Algorand Foundation.

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Ke Wu, Elaine Shi, and Hao Chung. Maximizing Miner Revenue in Transaction Fee Mechanism Design. In 15th Innovations in Theoretical Computer Science Conference (ITCS 2024). Leibniz International Proceedings in Informatics (LIPIcs), Volume 287, pp. 98:1-98:23, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2024)
https://doi.org/10.4230/LIPIcs.ITCS.2024.98

Abstract

Transaction fee mechanism design is a new decentralized mechanism design problem where users bid for space on the blockchain. Several recent works showed that the transaction fee mechanism design fundamentally departs from classical mechanism design. They then systematically explored the mathematical landscape of this new decentralized mechanism design problem in two settings: in the plain setting where no cryptography is employed, and in a cryptography-assisted setting where the rules of the mechanism are enforced by a multi-party computation protocol. Unfortunately, in both settings, prior works showed that if we want the mechanism to incentivize honest behavior for both users as well as miners (possibly colluding with users), then the miner revenue has to be zero. Although adopting a relaxed, approximate notion of incentive compatibility gets around this zero miner-revenue limitation, the scaling of the miner revenue is nonetheless poor. In this paper, we show that if we make a mild reasonable-world assumption that there are sufficiently many honest users, we can circumvent the known limitations on miner revenue, and design auctions that generate asymptotically optimal miner revenue. We also systematically explore the mathematical landscape of transaction fee mechanism design under the new reasonable-world assumptions, and demonstrate how such assumptions can alter the feasibility and infeasibility landscape.

Subject Classification

ACM Subject Classification
  • Security and privacy → Cryptography
Keywords
  • Blockchain
  • Mechanism Design
  • Transaction Fee

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