Transaction Fee Mechanism Design for Leaderless Blockchain Protocols
Pranav Garimidi, Lioba Heimbach, Tim Roughgarden
TL;DR
This paper studies transaction fee mechanisms for leaderless (DAG-based) blockchains where multiple block producers contribute to each block. It introduces an extensive-form game model, defines strong block-producer incentive compatibility (BPIC), and proposes the first-price auction with equal sharing (FPA-EQ) mechanism, which is strongly BPIC and guarantees at least $1- frac{1}{e}$ of the welfare achievable at equilibrium. The analysis connects Bayesian Nash equilibria of matroid auctions to IRR SPE in the multi-proposer TFM, applying smoothness arguments to obtain near-optimal welfare guarantees and showing the inherent tradeoffs that prevent DSIC alongside strong BPIC from achieving optimal welfare. The results provide theoretical guarantees for welfare and incentive alignment in DAG-based TFMs, highlighting the practical potential and fundamental limitations of multi-proposer designs in leaderless blockchains.
Abstract
We initiate the study of transaction fee mechanism design for blockchain protocols in which multiple block producers contribute to the production of each block. Our contributions include: - We propose an extensive-form (multi-stage) game model to reason about the game theory of multi-proposer transaction fee mechanisms. - We define the strongly BPIC property to capture the idea that all block producers should be motivated to behave as intended: for every user bid profile, following the intended allocation rule is a Nash equilibrium for block producers that Pareto dominates all other Nash equilibria. - We propose the first-price auction with equal sharing (FPA-EQ) mechanism as an attractive solution to the multi-proposer transaction fee mechanism design problem. We prove that the mechanism is strongly BPIC and guarantees at least a 63.2% fraction of the maximum-possible expected welfare at equilibrium. - We prove that the compromises made by the FPA-EQ mechanism are qualitatively necessary: no strongly BPIC mechanism with non-trivial welfare guarantees can be DSIC, and no strongly BPIC mechanism can guarantee optimal welfare at equilibrium.