A Solomonic Solution to Blockchain Front-Running

14 Pages Posted: 19 Feb 2022 Last revised: 3 Jan 2023

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Richard Holden

University of New South Wales (UNSW)

Date Written: January 3, 2023

Abstract

Blockchain front-running involves multiple agents, other than the legitimate agent, claiming a payment from performing a contract. It arises because of the public nature of blockchain transactions and potential network congestion. This paper notes that disputes over payments are similar to classic ownership disputes (such as King Solomon's dilemma). We propose a simultaneous report mechanism that eliminates blockchain front-running. In each case, the mechanism relies on threats to remove ownership from all claimants and preferences from the legitimate claimant over allocations to other agents.

Keywords: subgame perfect implementation, blockchain, front-running, mechanism design, ownership

JEL Classification: D82, D86

Suggested Citation

Gans, Joshua S. and Holden, Richard, A Solomonic Solution to Blockchain Front-Running (January 3, 2023). Rotman School of Management Working Paper No. 4034666, Available at SSRN: https://ssrn.com/abstract=4034666 or http://dx.doi.org/10.2139/ssrn.4034666

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Richard Holden

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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