1. A Novel GSP Auction Mechanism for Dynamic Confirmation Games on Bitcoin Transactions
- Author
-
Fei-Yue Wang, Juanjuan Li, Xiaochun Ni, and Yong Yuan
- Subjects
Waiting time ,Mathematical optimization ,Information Systems and Management ,Computer Networks and Communications ,Mechanism (biology) ,Computer science ,Stochastic game ,Stable equilibrium ,Maximization ,Computer Science Applications ,Hardware and Architecture ,Asynchronous communication ,Complete information ,Database transaction - Abstract
We propose to apply the Generalized Second Price (GSP) auction mechanism in the dynamic confirmation game on Bitcoin transactions. Our model is targeted to deal with the instability and low efficiency of the currently-adopted Generalized First Price (GFP) mechanism. Besides, we use the "rank-by-cost" rule to replace the "rank-by-fee" rule, where each transaction's cost is calculated by the fee and the waiting time. Aiming to probe users' equilibrium strategy, we first discuss the GSP game with complete information under synchronous submissions, and show that it has the Locally Envy-Free equilibrium. Then, we study the GSP game with incomplete information under asynchronous submissions, and define two types of strategies, i.e. the Farsighted Balanced (FB) strategy and the Instant Balanced (IB) strategy. The FB strategy is in line with users' needs of maximizing the long-term payoffs; however it cannot generate a stable equilibrium. Alternatively, the IB strategy focuses on the instant payoff maximization, and if all users follow the IB strategy, their equilibrium fees can finally converge to a stable profile. Finally, we design computational experiments to validate our theoretical analysis, and results indicate that this GSP mechanism is superior to the GFP mechanism, and it can converge under the IB strategy.
- Published
- 2022