New games, new markets: the science of cryptocurrencies and incentives
Arvind Narayanan (Princeton University)
CSE 520 Colloquium Series
Thursday, January 4, 2018, 3:30 pm
EEB-105
Abstract
The security of Bitcoin and other cryptocurrencies rests on assumptions about the behavior of miners. But when miners act in their self interest, could the system collapse? This is a game theory question. Mining is unlike other games we're familiar with, and our intuitions can be badly misleading. For example, a miner can divide her mining power into arbitrarily many slices and execute a different strategy for each slice. I'll present results that contradict widely held assumptions both in the "proof of work" and "proof of stake" settings.
Cryptocurrencies also enable new types of markets. The blockchain is a limited resource, which has led to a market for block space, where users must pay for their transactions to be included in the blockchain. Unlike other markets, supply is undifferentiated (most users don't care which miner picks up their transaction) but demand is highly heterogeneous (transactions have different sizes and priorities). When we empirically analyze the block space market and other markets using publicly available blockchain data, we find surprising behavior. These findings help inform the design of future blockchain-based markets.
The science of incentives in cryptocurrencies is at its infancy, and I'll argue for an approach that combines rigorous theory with careful measurement. This talk is based on several recent and ongoing projects including:
http://randomwalker.info/publications/mining_CCS.pdf
https://arxiv.org/pdf/1709.02489.pdf
http://randomwalker.info/publications/namespaces.pdf
http://www.jbonneau.com/doc/CBEKMN14-WEIS-decentralizing_prediction_markets.pdf
Bio
Arvind Narayanan is an Assistant Professor of Computer Science at Princeton. He leads the Princeton Web Transparency and Accountability Project to uncover how companies collect and use our personal information. Narayanan also leads a research team investigating the security, anonymity, and stability of cryptocurrencies as well as novel applications of blockchains. He co-created a Massive Open Online Course as well as a textbook on Bitcoin and cryptocurrency technologies. His doctoral research showed the fundamental limits of de-identification, for which he received the Privacy Enhancing Technologies Award.
Narayanan is an affiliated faculty member at the Center for Information Technology Policy at Princeton and an affiliate scholar at Stanford Law School's Center for Internet and Society. You can follow him on Twitter at @random_walker.