1169. Playing by the Rules? Uncovering Validator Strategies to Game the Incentives Set by Proof-of-Stake Slashing Mechanisms
Invited abstract in session TA-53: New Trends in Game Theory IV, stream Game Theory and Mathematical Economics.
Tuesday, 8:30-10:00Room: Liberty Moot Court
Authors (first author is the speaker)
| 1. | Sascha Hägele
|
| Chair of Managerial Accounting, Saarland University |
Abstract
Despite being the first and largest cryptocurrency by market capitalization, many modern successful cryptocurrencies differ significantly from Bitcoin, particularly in their consensus mechanisms. Meanwhile, Proof-of-Stake (PoS) has been introduced as an alternative to Bitcoin's Proof-of-Work (PoW), with the goal of drastically reducing the energy consumption and environmental impact associated with cryptocurrency networks. This shift has led to major cryptocurrencies implementing PoS, most notably Ethereum. However, unlike PoW, which imposes significant computational costs on voting and especially block proposals due to the energy consumption required for mining, PoS does not inherently impose such costs. To address this issue, so-called slashing mechanisms have been introduced to incentivize truthful proposals and voting while penalizing dishonest behavior and spam. Despite the widespread adoption of PoS in various blockchain ecosystems, including Ethereum, Cardano, and Avalanche, slashing mechanisms vary widely in their design and terminology. This study aims to establish a common framework for analyzing the incentive structures of these mechanisms. Using game-theoretic and agent-based modeling approaches, the study examines how validators can strategically navigate the incentives set by these slashing mechanisms. Empirical results support the theoretical analysis and highlight potential vulnerabilities and deviations from the intended economic incentives.
Keywords
- Agent Systems
- Economic Modeling
- Network Design
Status: accepted
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