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DOI: 10.4230/LIPIcs.AFT.2024.19

Credible, Optimal Auctions via Public Broadcast

Authors: Tarun Chitra, Matheus V. X. Ferreira, and Kshitij Kulkarni

Published in: LIPIcs, Volume 316, 6th Conference on Advances in Financial Technologies (AFT 2024)

Abstract

We study auction design in a setting where agents can communicate over a censorship-resistant broadcast channel like the ones we can implement over a public blockchain. We seek to design credible, strategyproof auctions in a model that differs from the traditional mechanism design framework because communication is not centralized via the auctioneer. We prove this allows us to design a larger class of credible auctions where the auctioneer has no incentive to be strategic. Intuitively, a decentralized communication model weakens the auctioneer’s adversarial capabilities because they can only inject messages into the communication channel but not delete, delay, or modify the messages from legitimate buyers. Our main result is a separation in the following sense: we give the first instance of an auction that is credible only if communication is decentralized. Moreover, we construct the first two-round auction that is credible, strategyproof, and optimal when bidder valuations are α-strongly regular, for α > 0. Our result relies on mild assumptions - namely, the existence of a broadcast channel and cryptographic commitments.

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Tarun Chitra, Matheus V. X. Ferreira, and Kshitij Kulkarni. Credible, Optimal Auctions via Public Broadcast. In 6th Conference on Advances in Financial Technologies (AFT 2024). Leibniz International Proceedings in Informatics (LIPIcs), Volume 316, pp. 19:1-19:16, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2024)

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@InProceedings{chitra_et_al:LIPIcs.AFT.2024.19,
  author =	{Chitra, Tarun and Ferreira, Matheus V. X. and Kulkarni, Kshitij},
  title =	{{Credible, Optimal Auctions via Public Broadcast}},
  booktitle =	{6th Conference on Advances in Financial Technologies (AFT 2024)},
  pages =	{19:1--19:16},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-345-4},
  ISSN =	{1868-8969},
  year =	{2024},
  volume =	{316},
  editor =	{B\"{o}hme, Rainer and Kiffer, Lucianna},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2024.19},
  URN =		{urn:nbn:de:0030-drops-209550},
  doi =		{10.4230/LIPIcs.AFT.2024.19},
  annote =	{Keywords: credible auctions, blockchains, cryptographic auctions, optimal auction design, mechanism design with imperfect commitment}
}

Document

DOI: 10.4230/LIPIcs.AFT.2023.4

Designing Multidimensional Blockchain Fee Markets

Authors: Theo Diamandis, Alex Evans, Tarun Chitra, and Guillermo Angeris

Published in: LIPIcs, Volume 282, 5th Conference on Advances in Financial Technologies (AFT 2023)

Abstract

Public blockchains implement a fee mechanism to allocate scarce computational resources across competing transactions. Most existing fee market designs utilize a joint, fungible unit of account (e.g., gas in Ethereum) to price otherwise non-fungible resources such as bandwidth, computation, and storage, by hardcoding their relative prices. Fixing the relative price of each resource in this way inhibits granular price discovery, limiting scalability and opening up the possibility of denial-of-service attacks. As a result, many prominent networks such as Ethereum and Solana have proposed multidimensional fee markets. In this paper, we provide a principled way to design fee markets that efficiently price multiple non-fungible resources. Starting from a loss function specified by the network designer, we show how to dynamically compute prices that align the network’s incentives (to minimize the loss) with those of the users and miners (to maximize their welfare), even as demand for these resources changes. We derive an EIP-1559-like mechanism from first principles as an example. Our pricing mechanism follows from a natural decomposition of the network designer’s problem into two parts that are related to each other via the resource prices. These results can be used to efficiently set fees in order to improve network performance.

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Theo Diamandis, Alex Evans, Tarun Chitra, and Guillermo Angeris. Designing Multidimensional Blockchain Fee Markets. In 5th Conference on Advances in Financial Technologies (AFT 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 282, pp. 4:1-4:23, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

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@InProceedings{diamandis_et_al:LIPIcs.AFT.2023.4,
  author =	{Diamandis, Theo and Evans, Alex and Chitra, Tarun and Angeris, Guillermo},
  title =	{{Designing Multidimensional Blockchain Fee Markets}},
  booktitle =	{5th Conference on Advances in Financial Technologies (AFT 2023)},
  pages =	{4:1--4:23},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-303-4},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{282},
  editor =	{Bonneau, Joseph and Weinberg, S. Matthew},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2023.4},
  URN =		{urn:nbn:de:0030-drops-191933},
  doi =		{10.4230/LIPIcs.AFT.2023.4},
  annote =	{Keywords: Blockchains, transaction fees, convex optimization, mechanism design}
}

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Documents authored by Chitra, Tarun

Credible, Optimal Auctions via Public Broadcast

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Designing Multidimensional Blockchain Fee Markets

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