Bayesian Mechanism Design for Blockchain Transaction Fee Allocation

In blockchain systems, the design of transaction fee mechanisms (TFMs) is essential for stability and satisfaction for both miners and users. A recent work has proven the impossibility of collusion-proof mechanisms that achieve both nonzero miner revenue and Dominant Strategy Incentive Compatibility (DSIC) for users. However, a positive miner revenue is important in practice to motivate miners. To address this challenge, we consider a Bayesian game setting and relax the DSIC requirement for users to Bayesian Nash Incentive Compatibility (BNIC). In particular, we propose an auxiliary mechanism method that makes connections between BNIC and DSIC mechanisms. With the auxiliary mechanism method, we design a TFM based on the multinomial logit (MNL) choice model, and prove that the TFM has both BNIC and collusion-proof properties with an asymptotic constant-factor approximation of optimal miner revenue for i.i.d. bounded valuations. Our result breaks the zero-revenue barrier while preserving truthfulness and collusion-proof properties.

Funding: X. Chen thanks the NSF [Grant IIS-1845444] for support.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/opre.2024.0865.