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Optimizing Exit Queues for Proof-Of-Stake Blockchains: A Mechanism Design Approach

Authors: Michael Neuder, Mallesh Pai, and Max Resnick

Published in: LIPIcs, Volume 316, 6th Conference on Advances in Financial Technologies (AFT 2024)


Abstract
Byzantine fault-tolerant consensus protocols have provable safety and liveness properties for static validator sets. In practice, however, the validator set changes over time, potentially eroding the protocol’s security guarantees. For example, systems with accountable safety may lose some of that accountability over time as adversarial validators exit. As a result, protocols must rate limit entry and exit so that the set changes slowly enough to ensure security. Here, the system designer faces a fundamental trade-off. The harder it is to exit the system, the less attractive staking becomes; alternatively, the easier it is to exit the system, the less secure the protocol will be. This paper provides the first systematic study of exit queues for Proof-of-Stake blockchains. Given a collection of validator-set consistency constraints imposed by the protocol, the social planner’s goal is to provide a constrained-optimal mechanism that minimizes disutility for the participants. We introduce the MINSLACK mechanism, a dynamic capacity first-come-first-served queue in which the amount of stake that can exit in a period depends on the number of previous exits and the consistency constraints. We show that MINSLACK is optimal when stakers equally value the processing of their withdrawal. When stakers values are heterogeneous, the optimal mechanism resembles a priority queue with dynamic capacity. However, this mechanism must reserve exit capacity for the future in case a staker with a much higher need for liquidity arrives. We conclude with a survey of known consistency constraints and highlight the diversity of existing exit mechanisms.

Cite as

Michael Neuder, Mallesh Pai, and Max Resnick. Optimizing Exit Queues for Proof-Of-Stake Blockchains: A Mechanism Design Approach. In 6th Conference on Advances in Financial Technologies (AFT 2024). Leibniz International Proceedings in Informatics (LIPIcs), Volume 316, pp. 20:1-20:22, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2024)


Copy BibTex To Clipboard

@InProceedings{neuder_et_al:LIPIcs.AFT.2024.20,
  author =	{Neuder, Michael and Pai, Mallesh and Resnick, Max},
  title =	{{Optimizing Exit Queues for Proof-Of-Stake Blockchains: A Mechanism Design Approach}},
  booktitle =	{6th Conference on Advances in Financial Technologies (AFT 2024)},
  pages =	{20:1--20:22},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-345-4},
  ISSN =	{1868-8969},
  year =	{2024},
  volume =	{316},
  editor =	{B\"{o}hme, Rainer and Kiffer, Lucianna},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2024.20},
  URN =		{urn:nbn:de:0030-drops-209564},
  doi =		{10.4230/LIPIcs.AFT.2024.20},
  annote =	{Keywords: Mechanism Design, Market Design, Accountable Safety, Proof-of-Stake, Blockchain}
}
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