HaPPY-Mine: Designing a Mining Reward Function

  title={HaPPY-Mine: Designing a Mining Reward Function},
  author={Lucianna Kiffer and Rajmohan Rajaraman},
  booktitle={Financial Cryptography},
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… 



An Axiomatic Approach to Block Rewards

It is shown that Bitcoin's proportional allocation rule is the unique allocation rule satisfying a certain system of properties, but this does not hold for slightly weaker sets of properties; and a rich class of allocation rules can be approximately implemented in a proof-of-work blockchain.

A Mean Field Games Model for Cryptocurrency Mining

We propose a mean field game model to study the question of how centralization of reward and computational power occur in the Bitcoin-like cryptocurrencies. Miners compete against each other for

On the Instability of Bitcoin Without the Block Reward

This work shows that with only transaction fees, the variance of the block reward is very high due to the exponentially distributed block arrival time, and it becomes attractive to fork a "wealthy" block to "steal" the rewards therein and results in an equilibrium with undesirable properties for Bitcoin's security and performance.

The Gap Game

This work analyzes cryptocurrency security in realistic settings, taking into account all elements of expenses and rewards, and shows that gaps form well before fees are the only incentive, and analyzes the implications on security.

The Bitcoin Mining Game: On the Optimality of Honesty in Proof-of-work Consensus Mechanism

The game has a multiplicity of equilibria and the parameter constellations for each of them are analyzed, showing that the minimum requirement to find it optimal not to report is decreasing with the number of miners who are not reporting, and increasing the heterogeneity among players reduces the likelihood that they choose to report.

The Economics of Bitcoin Mining, or Bitcoin in the Presence of Adversaries

It is argued that Bitcoin will require the emergence of governance structures, contrary to the commonly held view in the Bitcoin community that the currency is ungovernable.

Oceanic Games: Centralization Risks and Incentives in Blockchain Mining

The concept of Oceanic Games, used to analyze decision making in corporate settings with small numbers of dominant players (shareholders) and large numbers of individually insignificant players, is adapted to blockchain mining and used to identify issues relevant to the design of future cryptocurrencies and formulate prospective research questions.

Rational Protocol Design: Cryptography against Incentive-Driven Adversaries

This work considers a two-party game between an protocol designer and an external attacker to modeling a protocol under attack from an external entity, and demonstrates how knowledge of the attacker's incentives can be used to circumvent known impossibility results in this setting.

An Equilibrium Model of Blockchain-Based Cryptocurrencies

The equilibrium model has two main implications: first, decentralization and technological improvement in mining are the drivers of low transaction fees and low mining costs, and second, limited block size and mining difficulty create an incentive mechanism that achieves the sustainability of cryptocurrency in the long run.

The Blockchain Folk Theorem

This work model the proof-of-work blockchain protocol as a stochastic game and analyse the equilibrium strategies of rational, strategic miners, identifying negative externalities implying that equilibrium investment in computing capacity is excessive.