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Incentive Compatibility of Bitcoin Mining Pool Reward Functions

  • Okke SchrijversEmail author
  • Joseph Bonneau
  • Dan Boneh
  • Tim Roughgarden
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 9603)

Abstract

In this paper we introduce a game-theoretic model for reward functions in Bitcoin mining pools. Our model consists only of an unordered history of reported shares and gives participating miners the strategy choices of either reporting or delaying when they discover a share or full solution. We defined a precise condition for incentive compatibility to ensure miners strategy choices optimize the welfare of the pool as a whole. With this definition we show that proportional mining rewards are not incentive compatible in this model. We introduce and analyze a novel reward function which is incentive compatible in this model. Finally we show that the popular reward function pay-per-last-N-shares is also incentive compatible in a more general model.

Keywords

Reward Function Incentive Compatibility Full Solution Steady Stream Informational Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© International Financial Cryptography Association 2017

Authors and Affiliations

  • Okke Schrijvers
    • 1
    Email author
  • Joseph Bonneau
    • 1
  • Dan Boneh
    • 1
  • Tim Roughgarden
    • 1
  1. 1.Stanford UniversityStanfordUSA

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