Bitcoin transactions and GSP auctions
Bitcoin and crypto currency in general is a new area in tech that is constantly evolving. The basic process of mining a crypto currency is directly analogous to online ad auctions. The miners are selling the slots and users are bidding with transaction fees. This paper explores the idea of applying the GSP auction model to the Bitcoin transaction auction. The paper further goes on to explain how by using this new GSP bitcoin transaction model there exists a unique pure strategy Nash Equilibrium that can be calculated. The experimenters predict this model could be used to add efficiency to the overall blockchain technology that is behind cryptocurrency.
This paper has many connections to the game theory and auction models being discussed in this class. The application of the Nash Equilibrium of a game to crypto currency is incredibly interesting and the experimenters described the process thoroughly. In order to prove the pure strategy NE for the bitcoin transactions, many complex mathematical proofs were presented by the experimenters. The main takeaway from this I believe was the incredible amount of data required to actually calculate the PSNE. More than 15 variables are involved in the calculation. This type of auction calculation is much more advanced than what we normally calculate in class but it is incredibly interesting to see the real life applications of our so called simple calculations. This paper really proves that with enough data collection and analysis, very complex solutions to difficult problems can be found.
Citations:
Li, J., Yuan, Y., & Wang, F. (2019). A novel GSP auction mechanism for ranking Bitcoin transactions in blockchain mining. Decision Support Systems, 124, 113094. doi:10.1016/j.dss.2019.113094