Analysis of interaction between miner decision making and user action for incentive mechanism of bitcoin blockchain

Abstract

In Bitcoin blockchain, miner nodes are likely to choose transactions with high fee to be included in a block. This makes transactions with high fee being processed fast, affecting the amount of transaction fee that users want to pay. The reward for a winning miner consists of transaction fee and newly issued coins, and hence the amount of newly issued coins also affects the miner decision to participate in the mining competition. In addition, mining reward also affects the total hash computing power, which plays an important role of Bitcoin security for reducing the success probability of security attack by a malicious miner. In this paper, we develop a mathematical model for analyzing the interaction between miner decision making and user actions in terms of transaction fees, transaction-confirmation time, and security. We analyze the transaction-inclusion process with queueing theory, while decision making processes of miners and users are analyzed in the context of Nash equilibrium. The numerical examples show how the mining costs and newly issued coins affect miner decision making.