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      Oceanic Games: Centralization Risks and Incentives in Blockchain Mining

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          Abstract

          To participate in the distributed consensus of permissionless blockchains, prospective nodes -- or miners -- provide proof of designated, costly resources. However, in contrast to the intended decentralization, current data on blockchain mining unveils increased concentration of these resources in a few major entities, typically mining pools. To study strategic considerations in this setting, we employ the concept of Oceanic Games, Milnor and Shapley (1978). Oceanic Games have been used to analyze decision making in corporate settings with small numbers of dominant players (shareholders) and large numbers of individually insignificant players, the ocean. Unlike standard equilibrium models, they focus on measuring the value (or power) per entity and per unit of resource} in a given distribution of resources. These values are viewed as strategic components in coalition formations, mergers and resource acquisitions. Considering such issues relevant to blockchain governance and long-term sustainability, we adapt oceanic games to blockchain mining and illustrate the defined concepts via examples. The application of existing results reveals incentives for individual miners to merge in order to increase the value of their resources. This offers an alternative perspective to the observed centralization and concentration of mining power. Beyond numerical simulations, we use the model to identify issues relevant to the design of future cryptocurrencies and formulate prospective research questions.

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          Volunteering as Red Queen mechanism for cooperation in public goods games.

          The evolution of cooperation among nonrelated individuals is one of the fundamental problems in biology and social sciences. Reciprocal altruism fails to provide a solution if interactions are not repeated often enough or groups are too large. Punishment and reward can be very effective but require that defectors can be traced and identified. Here we present a simple but effective mechanism operating under full anonymity. Optional participation can foil exploiters and overcome the social dilemma. In voluntary public goods interactions, cooperators and defectors will coexist. We show that this result holds under very diverse assumptions on population structure and adaptation mechanisms, leading usually not to an equilibrium but to an unending cycle of adjustments (a Red Queen type of evolution). Thus, voluntary participation offers an escape hatch out of some social traps. Cooperation can subsist in sizable groups even if interactions are not repeated, defectors remain anonymous, players have no memory, and assortment is purely random.
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            Majority Is Not Enough: Bitcoin Mining Is Vulnerable

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              SoK: Research Perspectives and Challenges for Bitcoin and Cryptocurrencies

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                Author and article information

                Journal
                04 April 2019
                Article
                1904.02368
                87537c2d-6758-4de6-85eb-7818d0a3c077

                http://arxiv.org/licenses/nonexclusive-distrib/1.0/

                History
                Custom metadata
                91A80, 97R99
                Mathematical Research for Blockchain Economy - 1st International Conference MARBLE 2019, Santorini, Greece
                cs.GT cs.CR

                Theoretical computer science,Security & Cryptology
                Theoretical computer science, Security & Cryptology

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