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2017 | OriginalPaper | Chapter

Mixing Coins of Different Quality: A Game-Theoretic Approach

Authors : Svetlana Abramova, Pascal Schöttle, Rainer Böhme

Published in: Financial Cryptography and Data Security

Publisher: Springer International Publishing

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Abstract

Cryptocoins based on public distributed ledgers can differ in their quality due to different subjective values users assign to coins depending on the unique transaction history of each coin. We apply game theory to study how qualitative differentiation between coins will affect the behavior of users interested in improving their anonymity through mixing services. We present two stylized models of mixing with perfect and imperfect information and analyze them for three distinct quality propagation policies: poison, haircut, and seniority. In the game of perfect information, mixing coins of high quality remains feasible under certain conditions, while imperfect information eventually leads to a mixing market where only coins of the lowest quality are mixed.

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previous chapter Incentivizing Blockchain Forks via Whale Transactions

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Note that the game of perfect information under the poison regime has even more Nash equilibria. However, these are not subgame perfect.

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Title: Mixing Coins of Different Quality: A Game-Theoretic Approach
Authors: Svetlana Abramova
Pascal Schöttle
Rainer Böhme
Publisher: Springer International Publishing
Book: Financial Cryptography and Data Security
Print ISBN: 978-3-319-70277-3

Electronic ISBN: 978-3-319-70278-0

Copyright Year: 2017
DOI: https://doi.org/10.1007/978-3-319-70278-0_18

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