Transaction Propagation on Permissionless Blockchains: Incentive and Routing Mechanisms
This addresses sustainability issues for fully decentralized blockchains with rational nodes, though it is incremental as it builds on existing propagation and consensus protocols.
The paper tackles the lack of explicit incentives for transaction propagation in permissionless blockchains by proposing a mechanism where nodes receive a share of transaction fees, and it combines this with smart routing to reduce communication and storage costs, cutting redundant propagation from network size to a factor of average shortest path length.
Existing permissionless blockchain solutions rely on peer-to-peer propagation mechanisms, where nodes in a network transfer transaction they received to their neighbors. Unfortunately, there is no explicit incentive for such transaction propagation. Therefore, existing propagation mechanisms will not be sustainable in a fully decentralized blockchain with rational nodes. In this work, we formally define the problem of incentivizing nodes for transaction propagation. We propose an incentive mechanism where each node involved in the propagation of a transaction receives a share of the transaction fee. We also show that our proposal is Sybil-proof. Furthermore, we combine the incentive mechanism with smart routing to reduce the communication and storage costs at the same time. The proposed routing mechanism reduces the redundant transaction propagation from the size of the network to a factor of average shortest path length. The routing mechanism is built upon a specific type of consensus protocol where the round leader who creates the transaction block is known in advance. Note that our routing mechanism is a generic one and can be adopted independently from the incentive mechanism.