2023/03/27 by Theo Diamandis, Guillermo Angeris, Diamandis, Theo +1 · 1 citation
Business, Management and Accounting · Computer Science · Decision Sciences · #Auction Theory and Applications #Blockchain Technology Applications and Security #Computer Science and Game Theory (cs.GT) #FOS: Computer and information sciences #FOS: Mathematics #Optimization and Control (math.OC) #Supply Chain and Inventory Management
paper · pdf · doi:10.48550/arxiv.2303.15239
openalex publication_date 2023/03/27 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Public blockchains group submitted transactions into batches, called blocks. A natural question is how to determine which transactions are included in these batches. In this note, we show a gap between the welfare of so-called `fair' ordering, namely first-in-first-out (an ideal that a number of blockchain protocols strive to achieve), where the first transactions to arrive are the ones put into the block, and the welfare of `optimal' inclusion that is, at least approximately, welfare-maximizing, such as choosing which transactions are included in a block via an auction. We show this gap is positive under a simple model with mild assumptions where we assume transactions are, roughly speaking, uniformly drawn from a reasonable distribution. Our results formalize a performance metric for blockchain inclusion rules and consequently provide a framework to help design and compare these rules. The results can be directly extended to ordering mechanisms as well.