Minting Mechanisms for (PoS) Blockchains

Summary

Permissionless blockchain systems, such as Bitcoin, rely on users using their computational power to solve a puzzle in order to achieve a consensus. To incentivise users in maintaining the system, newly minted coins are assigned to the user who solves this puzzle. A hardware race that has hence ensued among the users, has had a detrimental impact on the environment, with enormous energy consumption and increased global carbon footprint. On the other hand, proof of stake systems incentivise coin hoarding as players maximise their utility by holding their stakes. As a result, existing cryptocurrencies do not mimic the day-to-day usability of a fiat currency, but are rather regarded as crypto-assets or investment vectors. In this work we initiate the study of minting mechanisms in cryptocurrencies as a primitive on its own right, and as a solution to prevent coin hoarding we propose a novel minting mechanism based on waiting-time first-price auctions. Our main technical tool is a protocol to run an auction over any blockchain. Moreover, our protocol is the first to securely implement an auction without requiring a semi-trusted party, i.e., where every miner in the network is a potential bidder. Our approach is generically applicable and we show that it is incentive-compatible with the underlying blockchain, i.e., the best strategy for a player is to behave honestly. Our proof-of-concept implementation shows that our system is efficient and scales to tens of thousands of bidders.