{"ID":2825319,"CreatedAt":"2026-06-01T04:54:23.091178241Z","UpdatedAt":"2026-06-01T04:54:23.091178241Z","DeletedAt":null,"paper_url":"https://arxiv.org/abs/2512.20864","arxiv_id":"2512.20864","title":"(Im)possibility of Incentive Design for Challenge-based Blockchain Protocols","abstract":"Blockchains offer a decentralized and secure execution environment strong enough to host cryptocurrencies, but the state-replication model makes on-chain computation expensive. To avoid heavy on-chain workloads, systems like Truebit and optimistic rollups use challenge-based protocols, performing computations off-chain and invoking the chain only when challenged. This keeps normal-case costs low and, if at least one honest challenger exists, can catch fraud. What has been less clear is whether honest challengers are actually incentivized and a dishonest proposer is properly damaged under the worst case environment. We build a model with a colluding minority, heterogeneous costs, and three ordering modes. We then ask whether two goals can be met together: honest non-loss and fraud deterrence. Our results are clear: in single-winner designs, the incentive design is impossible or limited in scale. By contrast, in multi-winner designs, we obtain simple, explicit conditions under which both goals hold.","short_abstract":"Blockchains offer a decentralized and secure execution environment strong enough to host cryptocurrencies, but the state-replication model makes on-chain computation expensive. To avoid heavy on-chain workloads, systems like Truebit and optimistic rollups use challenge-based protocols, performing computations off-chain...","url_abs":"https://arxiv.org/abs/2512.20864","url_pdf":"https://arxiv.org/pdf/2512.20864v2","authors":"[\"Suhyeon Lee\",\"Dieu-Huyen Nguyen\",\"Donghwan Lee\"]","published":"2025-12-24T00:44:32Z","proceeding":"cs.GT","tasks":"[\"cs.GT\"]","methods":"[]","has_code":false}