Abstract
We define and analyze three mechanisms for getting common knowledge, a posteriori truths about the world, onto a blockchain in a decentralized setting. We show that, when a reasonable economic condition is met, these mechanisms are individually rational, incentive compatible, and decide the true outcome of valid oracle queries in both the non-cooperative and cooperative settings. These mechanisms are based upon repeated games with two classes of players: queriers who desire to get common knowledge truths onto the blockchain and a pool of reporters who posses such common knowledge. Presented with a new oracle query, reporters have an opportunity to report the truth in return for a fee provided by the querier. During subsequent oracle queries, the querier has an opportunity to punish any reporters who did not report truthfully during previous rounds. While the set of reporters has the power to cause the oracle to lie, they are incentivized not to do so.
Highlights
IntroductionLEDGER VOL 4 (2019) 157-190 agreement with the winning outcome
(2) The querier chooses how to update the reporting pool We will show that A0 is incentive compatible by showing that there exists a Pareto efficient, subgame-perfect Nash equilibrium in the stage game which results in A0 returning the True outcome for the oracle query
We will show that our desired player behavior— where every reporter always reports the True outcome and the querier always removes from the reporting pool all and only those tokens used to lie—is in equilibrium in the stage game
Summary
LEDGER VOL 4 (2019) 157-190 agreement with the winning outcome The hope in these “Schelling scheme” approaches is that the truth will act as the Schelling point of a coordination game, which would result in the oracle returning the true outcome to the oracle query. We show that under certain economic conditions (which explicitly include any extraneous incentives introduced by any consumption of the oracle’s output) there exists equilibrium behavior in these stage games that results in the oracle returning the true outcome of real world events. These first incentive compatibility proofs take place in the non-cooperative model and assume that the set of queriers and the set of reporters is disjoint. With some additional conditions, our results hold in the cooperative model as well
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