Incentive compatible and anti-compounding of wealth in proof-of-stake

Abstract

Geometric reward function is proposed as an alternative choice to circumvent the problem of compounding. However, it’s not so desirable since no parties have incentives to participate in the consensus mechanism. In this paper, we tailor a new bonus reward function by adding random salts to the geometric reward function. The new reward function is a tradeoff between equitablity and incentive compatibility. We conclude that the quitability of the new reward function is optimal compared with others. Beyond that, we present Gini coefficients to fine-evaluate euqitability of reward functions. We propose a new metric (aka. reward ratio) to quantify the level of incentive compatibility. Our simulation results show that the new reward function performs better than others in both incentive compatibility and anti-compounding.