Papers
Topics
Authors
Recent
Gemini 2.5 Flash
Gemini 2.5 Flash
158 tokens/sec
GPT-4o
7 tokens/sec
Gemini 2.5 Pro Pro
45 tokens/sec
o3 Pro
4 tokens/sec
GPT-4.1 Pro
38 tokens/sec
DeepSeek R1 via Azure Pro
28 tokens/sec
2000 character limit reached

Censorship Resistance in On-Chain Auctions (2301.13321v2)

Published 30 Jan 2023 in econ.TH and cs.GT

Abstract: Modern blockchains guarantee that submitted transactions will be included eventually; a property formally known as liveness. But financial activity requires transactions to be included in a timely manner. Unfortunately, classical liveness is not strong enough to guarantee this, particularly in the presence of a motivated adversary who benefits from censoring transactions. We define censorship resistance as the amount it would cost the adversary to censor a transaction for a fixed interval of time as a function of the associated tip. This definition has two advantages, first it captures the fact that transactions with a higher miner tip can be more costly to censor, and therefore are more likely to swiftly make their way onto the chain. Second, it applies to a finite time window, so it can be used to assess whether a blockchain is capable of hosting financial activity that relies on timely inclusion. We apply this definition in the context of auctions. Auctions are a building block for many financial applications, and censoring competing bids offers an easy-to-model motivation for our adversary. Traditional proof-of-stake blockchains have poor enough censorship resistance that it is difficult to retain the integrity of an auction when bids can only be submitted in a single block. As the number of bidders $n$ in a single block auction increases, the probability that the winner is not the adversary, and the economic efficiency of the auction, both decrease faster than $1/n$. Running the auction over multiple blocks, each with a different proposer, alleviates the problem only if the number of blocks grows faster than the number of bidders. We argue that blockchains with more than one concurrent proposer have can have strong censorship resistance. We achieve this by setting up a prisoner's dilemma among the proposers using conditional tips.

Definition Search Book Streamline Icon: https://streamlinehq.com
References (25)
  1. Akbarpour, Mohammad and Shengwu Li, “Credible Mechanisms.,” in “EC” 2018, p. 371.
  2. by same author and by same author, “Credible auctions: A trilemma,” Econometrica, 2020, 88 (2), 425–467.
  3. Blass, Erik-Oliver and Florian Kerschbaum, “Strain: A secure auction for blockchains,” in “European Symposium on Research in Computer Security” Springer 2018, pp. 87–110.
  4. Budish, Eric, Peter Cramton, and John Shim, “The high-frequency trading arms race: Frequent batch auctions as a market design response,” The Quarterly Journal of Economics, 2015, 130 (4), 1547–1621.
  5. Buterin, Vitalik, “The Problem of Censorship,” https://blog.ethereum.org/2015/06/06/the-problem-of-censorship Jun 2015.
  6. by same author, “State of research: increasing censorship resistance of transactions under proposer/builder separation (PBS),” https://notes.ethereum.org/@vbuterin/pbs_censorship_resistance Jun 2021.
  7. Choudhuri, Arka Rai, Matthew Green, Abhishek Jain, Gabriel Kaptchuk, and Ian Miers, “Fairness in an unfair world: Fair multiparty computation from public bulletin boards,” in “Proceedings of the 2017 ACM SIGSAC Conference on Computer and Communications Security” 2017, pp. 719–728.
  8. Daian, Philip, Steven Goldfeder, Tyler Kell, Yunqi Li, Xueyuan Zhao, Iddo Bentov, Lorenz Breidenbach, and Ari Juels, “Flash boys 2.0: Frontrunning in decentralized exchanges, miner extractable value, and consensus instability,” in “2020 IEEE Symposium on Security and Privacy (SP)” IEEE 2020, pp. 910–927.
  9. Elkind, Edith and Helger Lipmaa, “Interleaving cryptography and mechanism design: The case of online auctions,” in “Financial Cryptography: 8th International Conference, FC 2004, Key West, FL, USA, February 9-12, 2004. Revised Papers 8” Springer 2004, pp. 117–131.
  10. Ferreira, Matheus VX and David C Parkes, “Credible Decentralized Exchange Design via Verifiable Sequencing Rules,” arXiv preprint arXiv:2209.15569, 2022.
  11. by same author and S Matthew Weinberg, “Credible, truthful, and two-round (optimal) auctions via cryptographic commitments,” in “Proceedings of the 21st ACM Conference on Economics and Computation” 2020, pp. 683–712.
  12. Flashbots, “The future of MeV is suave: Flashbots,” Nov 2022.
  13. Frankie, Dan Robinson, Dave White, and andy8052, “Gradual Dutch Auctions,” Apr 2022.
  14. Galal, Hisham S and Amr M Youssef, “Verifiable sealed-bid auction on the ethereum blockchain,” in “Financial Cryptography and Data Security: FC 2018 International Workshops, BITCOIN, VOTING, and WTSC, Nieuwpoort, Curaçao, March 2, 2018, Revised Selected Papers 22” Springer 2019, pp. 265–278.
  15. Johnson, Nicholas AG, Theo Diamandis, Alex Evans, Henry de Valence, and Guillermo Angeris, “Concave Pro-rata Games,” 2022.
  16. Kelkar, Mahimna, Fan Zhang, Steven Goldfeder, and Ari Juels, “Order-fairness for byzantine consensus,” in “Annual International Cryptology Conference” Springer 2020, pp. 451–480.
  17. by same author, Soubhik Deb, Sishan Long, Ari Juels, and Sreeram Kannan, “Themis: Fast, strong order-fairness in byzantine consensus,” Cryptology ePrint Archive, 2021.
  18. Kulkarni, Kshitij, Matheus VX Ferreira, and Tarun Chitra, “Credibility and Incentives in Gradual Dutch Auctions,” arXiv, 2023.
  19. by same author, Theo Diamandis, and Tarun Chitra, “Towards a theory of maximal extractable value i: Constant function market makers,” arXiv preprint arXiv:2207.11835, 2022.
  20. Lee, Byoungcheon, Kwangjo Kim, and Joongsoo Ma, “Efficient public auction with one-time registration and public verifiability,” in “Progress in Cryptology—INDOCRYPT 2001: Second International Conference on Cryptology in India Chennai, India, December 16–20, 2001 Proceedings 2” Springer 2001, pp. 162–174.
  21. Milionis, Jason, Dean Hirsch, Andy Arditi, and Pranav Garimidi, “A Framework for Single-Item NFT Auction Mechanism Design,” in “Proceedings of the 2022 ACM CCS Workshop on Decentralized Finance and Security” 2022, pp. 31–38.
  22. Monnot, Barnabe, “Unbundling PBS: Towards protocol-enforced proposer commitments (PEPC),” https://ethresear.ch/t/unbundling-pbs-towards-protocol-enforced-proposer-commitments-pepc/13879?u=barnabe Oct 2022.
  23. Suzuki, Koutarou and Makoto Yokoo, “Secure generalized vickrey auction using homomorphic encryption,” in “Financial Cryptography: 7th International Conference, FC 2003, Guadeloupe, French West Indies, January 27-30, 2003. Revised Papers 7” Springer 2003, pp. 239–249.
  24. Szabo, Nick, “Formalizing and securing relationships on public networks,” First monday, 1997.
  25. Wahrstätter, Anton, Jens Ernstberger, Aviv Yaish, Liyi Zhou, Kaihua Qin, Taro Tsuchiya, Sebastian Steinhorst, Davor Svetinovic, Nicolas Christin, Mikolaj Barczentewicz et al., “Blockchain Censorship,” arXiv preprint arXiv:2305.18545, 2023.
Citations (5)
View on Semantic Scholar

Summary

  • The paper introduces a quantitative measure of censorship resistance based on the cost to censor transactions relative to miner tips over finite intervals.
  • It applies this metric to on-chain auction mechanisms, highlighting vulnerabilities in single-block designs with increasing bidder numbers.
  • The study proposes multi-block and concurrent proposer models to mitigate censorship, offering practical strategies for time-sensitive financial applications.

Analysis of "Censorship Resistance in On-Chain Auctions"

The paper "Censorship Resistance in On-Chain Auctions" by Elijah Fox, Mallesh M. Pai, and Max Resnick undertakes a rigorous analysis of the ability of blockchain systems to uphold the timely inclusion of transactions, particularly in the context of auction mechanisms. As blockchain applications expand into financial domains where timing is critical, understanding censorship resistance becomes essential.

Definition of Censorship Resistance

The authors introduce a quantitative measure of censorship resistance as the cost incurred by an adversary to censor a transaction for a set period, relative to the transaction's associated miner tip. This definition acknowledges two key realities: higher tips make transactions more costly to censor, and censorship resistance must be evaluated over finite time intervals to support time-sensitive financial applications.

Application to Auction Mechanisms

The paper applies its definition of censorship resistance to blockchain-based auctions. Auctions are foundational components of many decentralized financial applications, and they present clear motivation for adversaries attempting to censor competing bids.

The authors highlight limitations in proof-of-stake blockchains, where single-block auctions with large numbers of bidders can swiftly become economically inefficient and vulnerable to censorship. As the number of bidders increases, the likelihood of the auction being censored increases due to the public goods nature of tipping, which discourages bidders from offering high enough tips to ensure inclusion.

Proposed Solutions

The authors explore two responses to these challenges:

  1. Multi-Block Design: Extending auctions over multiple blocks each managed by different proposers increases censorship resistance. However, this approach only improves resilience if the number of blocks exceeds the number of bidders—a constraint that could be problematic for time-sensitive applications requiring rapid execution, such as MEV auctions.
  2. Concurrent Proposers with Conditional Tips: They propose a more robust solution involving multiple concurrent block proposers. This approach allows for a "prisoner's dilemma" like setup where bidders provide high tips to unique proposers but lower tips when multiple proposers include their bid, drastically increasing the cost for an adversary attempting censorship. This concurrent proposer model effectively diminishes the monopoly power of a single proposer and leverages economic incentives to ensure honest behavior.

Theoretical Implications

The paper meticulously delineates how auction equilibrium shifts under different conditions of bidder and proposer dynamics. It utilizes game-theoretic frameworks to demonstrate that proposers can gain significant rents by colluding with bidders. The reduction of these rents through concurrent proposers and conditional tipping suggests a pathway to align blockchain incentives more closely with censorship resistance goals.

Practical Implications and Future Directions

While theoretical models indicate that single proposer systems inherently invite censorship and inefficiencies, the paper's proposals, particularly the concurrent proposer system, offer a viable alternative. However, practical implementation would require changes to blockchain consensus protocols, potentially increasing network complexity.

Future research could benefit from exploring how cryptographic techniques and improvements in distributed consensus frameworks can further bolster censorship resistance. Additionally, applying these findings to a broader range of smart contracts beyond auctions could yield important insights into enhancing the robustness of blockchain ecosystems against censorship.

In conclusion, "Censorship Resistance in On-Chain Auctions" provides valuable insights into the challenges and potential solutions for ensuring transaction inclusion in blockchain-based financial systems. The work sets a foundational understanding for advancing blockchain technology in a direction where it can more effectively support time-critical financial applications.

File Document Download Save Streamline Icon: https://streamlinehq.com PDF File Document Download Save Streamline Icon: https://streamlinehq.com Markdown