Paper 2020/532

Promise: Leveraging Future Gains for Collateral Reduction

Dominik Harz, Lewis Gudgeon, Rami Khalil, and Alexei Zamyatin

Abstract

Collateral employed in cryptoeconomic protocols protects against the misbehavior of economically rational agents, compensating honest users for damages and punishing misbehaving parties. The introduction of collateral, however, carries three disadvantages: (i) requiring agents to lock up a substantial amount of collateral can be an entry barrier, limiting the set of candidates to wealthy agents; (ii) affected agents incur ongoing opportunity costs as the collateral cannot be utilized elsewhere; and (iii) users wishing to interact with an agent on a frequent basis (e.g., with a service provider to facilitate second-layer payments), have to ensure the correctness of each interaction individually instead of subscribing to a service period in which interactions are secured by the underlying collateral. We present Promise, a subscription mechanism to decrease the initial capital requirements of economically rational service providers in cryptoeconomic protocols. The mechanism leverages future income (such as service fees) prepaid by users to reduce the collateral actively locked up by service providers, while sustaining secure operation of the protocol. Promise is applicable in the context of multiple service providers competing for users. We provide a model for evaluating its effectiveness and argue its security. Demonstrating Promise's applicability, we discuss how Promise can be integrated into a cross-chain interoperability protocol, XCLAIM, and a second-layer scaling protocol, NOCUST. Last, we present an implementation of the protocol on Ethereum showing that all functions of the protocol can be implemented in constant time complexity and Promise only adds USD 0.05 for a setup per user and service provider and USD 0.01 per service delivery during the subscription period.

Metadata
Available format(s)
PDF
Category
Applications
Publication info
Preprint. MINOR revision.
Keywords
blockchaincollateralcross-chainmechanism designcommit chains
Contact author(s)
dharz @ imperial ac uk
History
2020-05-07: received
Short URL
https://ia.cr/2020/532
License
Creative Commons Attribution
CC BY

BibTeX

@misc{cryptoeprint:2020/532,
      author = {Dominik Harz and Lewis Gudgeon and Rami Khalil and Alexei Zamyatin},
      title = {Promise: Leveraging Future Gains for Collateral Reduction},
      howpublished = {Cryptology ePrint Archive, Paper 2020/532},
      year = {2020},
      note = {\url{https://eprint.iacr.org/2020/532}},
      url = {https://eprint.iacr.org/2020/532}
}
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