Blockchain-based Decentralized Reward Sharing: The Case of Mining Pools

Abstract

We introduce a reciprocity protocol , an innovative approach to coordinating and sharing rewards in blockchains. Inherently decentralized and implementable, it puts emphasis on incentives rather than forcing specific sharing rules from the outset. Analyzing the non-cooperative game the protocol induces, we identify a robust, strict, and Pareto-dominant symmetric equilibrium. In it, even self-centered participants show extensive systemic reciprocity. Thus, despite a setting that is generally unfavorable to reciprocal behavior, the protocol enables users to build trust between themselves by taking on a role akin to a social contract.