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No Transaction Fees? No Problem! Achieving Fairness in Transaction Fee Mechanism Design

Sankarshan Damle, Varul Srivastava, Sujit Gujar

TL;DR

It is proved that rTFM guarantees incentive compatibility for miners and users while satisfying the novel fairness notions, namely Zero-fee Transaction Inclusion and Monotonicity.

Abstract

The recently proposed Transaction Fee Mechanism (TFM) literature studies the strategic interaction between the miner of a block and the transaction creators (or users) in a blockchain. In a TFM, the miner includes transactions that maximize its utility while users submit fees for a slot in the block. The existing TFM literature focuses on satisfying standard incentive properties -- which may limit widespread adoption. We argue that a TFM is "fair" to the transaction creators if it satisfies specific notions, namely Zero-fee Transaction Inclusion and Monotonicity. First, we prove that one generally cannot ensure both these properties and prevent a miner's strategic manipulation. We also show that existing TFMs either do not satisfy these notions or do so at a high cost to the miners' utility. As such, we introduce a novel TFM using on-chain randomness -- rTFM. We prove that rTFM guarantees incentive compatibility for miners and users while satisfying our novel fairness constraints.

No Transaction Fees? No Problem! Achieving Fairness in Transaction Fee Mechanism Design

TL;DR

It is proved that rTFM guarantees incentive compatibility for miners and users while satisfying the novel fairness notions, namely Zero-fee Transaction Inclusion and Monotonicity.

Abstract

The recently proposed Transaction Fee Mechanism (TFM) literature studies the strategic interaction between the miner of a block and the transaction creators (or users) in a blockchain. In a TFM, the miner includes transactions that maximize its utility while users submit fees for a slot in the block. The existing TFM literature focuses on satisfying standard incentive properties -- which may limit widespread adoption. We argue that a TFM is "fair" to the transaction creators if it satisfies specific notions, namely Zero-fee Transaction Inclusion and Monotonicity. First, we prove that one generally cannot ensure both these properties and prevent a miner's strategic manipulation. We also show that existing TFMs either do not satisfy these notions or do so at a high cost to the miners' utility. As such, we introduce a novel TFM using on-chain randomness -- rTFM. We prove that rTFM guarantees incentive compatibility for miners and users while satisfying our novel fairness constraints.
Paper Structure (76 sections, 8 theorems, 11 equations, 7 figures, 2 algorithms)

This paper contains 76 sections, 8 theorems, 11 equations, 7 figures, 2 algorithms.

Table of Contents

  1. Introduction
  2. TFM: Framework.
  3. TFM: Challenges with Incentives.
  4. Randomized TFM
  5. Related Work
  6. Fairness in Blockchain.
  7. Preliminaries
  8. TFM Model
  9. Transaction Fee Mechanism (TFM).
  10. User Model and Incentive Properties
  11. User Incentive Compatibility (UIC).
  12. Myopic Miner Incentive Compatibility (MIC).
  13. Off-chain Collusion Proof (OCAP).
  14. Popular TFMs and Their Properties
  15. First-price (FPA) TFM.
  16. ...and 61 more sections

Key Result

Theorem 1

No $\mathcal{T}^{TFM}$ with a non-trivial payment rule, which provides a strategic miner complete control over the transactions to add to its block, satisfies Zero-fee Transaction Inclusion (ZTi).

Figures (7)

  • Figure 1: rTFM: Effect of $\phi$
  • Figure D1: Empirical CoF for the distributions: (D1) Uniform, (D2) Truncated Gaussian and (D3) Exponential.
  • Figure D2: Zero-fee Inclusion (ZFi) for the distributions: (D1) Uniform, (D2) Truncated Gaussian and (D3) Exponential.
  • Figure D3: Empricial CoF: Miner's Utility Ratio for the distributions: (D1) Uniform, (D2) Truncated Gaussian and (D3) Exponential
  • Figure D4: Zero-fee Inclusion (ZFi) for the distributions: (D1) Uniform, (D2) Truncated Gaussian and (D3) Exponential
  • ...and 2 more figures

Theorems & Definitions (22)

  • Definition 1: Transaction Fee Mechanism (TFM)
  • Definition 2: UIC roughgarden21
  • Definition 3: MIC roughgarden21
  • Remark 1
  • Definition 4: Zero-fee Transaction Inclusion (ZTi)
  • Definition 5: Monotonicity
  • Remark 2
  • Theorem 1
  • Theorem 2
  • Definition 6: CoF
  • ...and 12 more