On Sidechain-Assisted Transaction Service Management for Internet of Things: A Random Contract Approach

Abstract

With the evolution of industrial technologies, the Internet of Things and blockchain show enormous potential. Different institutes with heterogeneous devices indicate diversity in their private information, including service demand and risk-bearing capability. Low efficiency and rising transaction prices of the public blockchain have been significant barriers to these potential service purchasers. The sidechain is recognized as one of the scalability solutions to a public chain. However, it is challenging to design the economic incentive mechanism and study the transaction fee pricing for transaction services on a sidechain due to the uncertainty of the network's performance and the miner's effort. Considering the asymmetric information (i.e., anonymous private information) and uncertainty, we propose a random-contract-based scheme to maximize the sidechain service provider's revenue and assign the service buyers the feasible service price under the framework of a sidechain linked to the public blockchain. Furthermore, we show that random contracts outperform the deterministic contracts under the increasing absolute risk-aversion assumption. We investigate service pricing in various scenarios using Geometric Brownian Motion. The simulation findings reveal that random contracts can increase the sidechain's revenue by 24.70%, compared with deterministic contracts. The efficient service payments have been reduced by 44.65%, compared with the main chain's cost.