Cooperative Mining in Blockchain Networks With Zero-Determinant Strategies

In proof-of-work (PoW)-based blockchain networks, the miners contribute their distributed computation in solving a crypto-puzzle competition to win the reward. To secure stable profits, some miners organize mining pools and share the rewards from the pool in proportion to each miner's contribution. However, some miners may exhibit malicious behaviors which cause a waste of distributed computation resource, even posing a threat on the efficiency of blockchain networks. In this paper, we propose a new game-theoretic framework to incentivize miners mining honestly and help to bring about a higher total welfare of blockchain networks. We first formulate the mining process as a noncooperative iterated game. We then propose a mechanism in terms of zero-determinant strategies (ZD strategies) to encourage the cooperative mining and improve the efficiency of mining in PoW-based blockchain networks. In addition, we theoretically analyze the maximum system welfare of the target pool through the method of optimization. Numerical illustrations are also presented to support our theoretical results.