Redesigning Bitcoin's fee market

Ron Lavi, Or Sattath, Aviv Zohar

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

33 Scopus citations

Abstract

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” [8], 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 true maximal willingness to pay) diminishes as the number of bids increases.

Original languageEnglish
Title of host publicationThe Web Conference 2019 - Proceedings of the World Wide Web Conference, WWW 2019
PublisherAssociation for Computing Machinery, Inc
Pages2950-2956
Number of pages7
ISBN (Electronic)9781450366748
DOIs
StatePublished - 13 May 2019
Event2019 World Wide Web Conference, WWW 2019 - San Francisco, United States
Duration: 13 May 201917 May 2019

Publication series

NameThe Web Conference 2019 - Proceedings of the World Wide Web Conference, WWW 2019

Conference

Conference2019 World Wide Web Conference, WWW 2019
Country/TerritoryUnited States
CitySan Francisco
Period13/05/1917/05/19

Keywords

  • Auction-Theory
  • Bitcoin
  • Blockchain
  • Cryptocurrency
  • Fee-market

ASJC Scopus subject areas

  • Computer Networks and Communications
  • Software

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