An incentive system for decentralized DAG-based platforms

Abstract

Decentralized public platforms are becoming increasingly popular due to a growing number of applications for various areas ofbusiness, finance, and social life. Authorless nodes can easily join such networks without any confirmation, making a transparent system of rewards and punishments crucial for the self-sustainability of public platforms. To achieve this, a system for incentivizing and punishing Workers’ behavior should be tightly harmonized with the corresponding consensus protocol, taking into account all of its features, and facilitating a favorable and supportive environment with equal rights for all participants. The main purpose of re-wards is to incentivize Workers to follow the protocol properly, and to penalize them for any type of misbehavior. The issues of block rewarding and punishing in decentralized networks have been well studied, but the DAG referential structure of the distributed ledger forces us to design methods that are more relevant. Since referential structures cannot be reliably validated due to the fact that they are built on the basis of the instantaneous visibility of blocks by a certain node, we propose to set rewards for blocksin the DAG network based on the degree of confidence of topological structures. In doing so, all honest nodes make common decisions based only on information recorded into the ledger, without overloading the network with additional interactions, since such data are al-ways identical and available.The main goal of this work is to design a fair distribution of rewards among honest Workers and estab-lish values for penalties for faulty ones, to ensure the general economic equilibrium of the Waterfall platform. The proposedap-proach has a flexible and transparent architecture that allows for its use for a wide range of PoS-based consensus protocols. The core principles are that Workers' rewards depend on the importance of the conducted work for block producing and achieving consensusand their penalties must not be less than the potential profit from possible attacks. The incentivizing system can facilitate protection from various kinds of attacks, namely, so-called Nothing-at-stake, Rich-get-richer, Sybil, and Splitting attacks, and from some specif-ic threats related to a DAG structure.Keywords: Tokenomics;incentivizing; blockchain; directed acyclic graph; consensus protocolCopyright©Odessa Polytechnic National University, 2022. All rights reservedFor citation:Mazurok I., Leonchyk Y., Grybniak S., Nashyvan O., Masalskyi R.An incentive system for decentralized DAG-based platforms. Applied Aspects of Information Technology.2022; Vol.5No.3: 196–207. DOI:https://doi.org/10.15276/aait.05.2022.13INTRODUCTIONThis work deals with the incentivizationof nodes of the Waterfall platform to honestly perform their duties for achieving a sustainable, secure, and high-performing network, by driving behaviors of all participants with economic leverages. However, it can be considered as a standalone work thatpresents an incentive system that can be implemented, in part or in whole, to other Proof-of-Stake (PoS) [1] consensus protocols of decentralized networks. ©Mazurok I., Leonchyk Y., Grybniak S.,Nashyvan O., Masalskyi R., 2022The issues of creating a fair distribution of rewards among platform Workers and setting values of penalties are addressed in detail.The incentive mechanism is the backbone of any tokenomics system(tokenomics is a term that captures a token’s economics). Itshould facilitate nodes’ positive actions such as processing transactions,validating blocks,and finalizing the ledger.We should note that users can join or leave public networks at their own discretion. Obviously, ifrewards do not cover Workers’ expenditures or are distributed unfairly, honest participants have no incentive to participate in such a network. A good tokenomics practice includes buildingacommunityThis is an open access article under the CC BY license (http://creativecommons.org/licenses/by/3.0)

Requirements for the development of smart contracts and anoverview of smart contract vulnerabilities at the Solidity codelevel on the Ethereum platform

“…Smart contracts have proven themselves and are used in many fieldsmedical, educational, legal sphere, project management, etc. It is advisable to use them in solving other complex intellectual tasks [10,11].…”

Multi-objective optimization of committee selection for hierarchicalByzantine fault tolerance-basedconsensus protocols

“…In this work, we consider the hierarchical consensus "Waterfall: Gozalandia," [25] having PoS and BFT features to optimize its performance. In [36] and [37] the tokenomics model and the incentive system for this protocol were presented in detail. A fair distribution of rewards among honest nodes and the establishment of values for penalties for faulty nodes were designed to ensure the general economic equilibrium of the Waterfall platform.…”

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“…In [43], a detailed discussion is presented on the reward distribution scheme among honest Workers for their role in block production and validation, as well as on the determination of penalties for faulty Workers, with particular attention paid to the consensus achievement mechanism of the Waterfall platform. The key principles underlying the proposed scheme are that Workers should be rewarded in proportion to the significance of their contributions, and that the penalties imposed on them should outweigh the potential benefits of any malicious actions.…”

“…for each block b, where q(b) ∈ [0; 1] is a measure of its referential structure "quality" (here 1 means the best quality), and the parameter l 0 not less than 0 signifies the minimum proportion of the transaction fees that are subjected to burning. To make this happen, the DAG topology created by honest Validators was examined and their typical behavior was described in [43]. Therefore, the function q(b) could be built on the basis of comparing the existing referential structure of block b with its theoretical reference (ideal) version.…”

“…With Waterfall, as with most other public platforms, there are penalties for the misbehavior of Workers, and simultaneous validation/production of conflicting blocks/messages leads to the loss of locked coins [43]. Based on data recorded in the ledger, these penalties are levied automatically.…”