Proof-of-Merit: Harnessing the Computing Power used by Blockchain Consensus Mechanisms for Complex Transaction Generation

37 Pages Posted: 13 Nov 2022

See all articles by Haozhao Zhang

Haozhao Zhang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics

Zhe Zhang

University of Texas at Dallas, Naveen Jindal School of Management

Eric Zheng

University of Texas at Dallas

Varghese Jacob

Naveen Jindal School of Management. University of Texas at Dallas

Date Written: July 28, 2022

Abstract

Existing popular Blockchain consensus mechanisms, such as Proof-of-Work (PoW), are designed to record existing transactions. However, they play no role in the transaction generation process. Many blockchain applications require high computation costs to generate and record transactions (e.g., in the case of PoW). In this paper, we propose an approach that allows us to utilize the consensus generation process to generate transactions by solving complex problems. We call it the Proof-of-Merit (PoM) mechanism - this approach decentralizes the transaction-generation process and selects proposed solutions to the problem based on their merit. We illustrate the PoM mechanism in the context of ridesharing, where a group of solvers provide solutions to the problem of matching riders with drivers. Moreover, we define two objectives - efficiency and equity - to evaluate PoM. We demonstrate PoM’s performance and nuanced properties using agent-based simulation. We show how Decentralized Control Parameter (DCP) influences the intrinsic tradeoffs between efficiency and equity. Further, we explore how to find the proper value of DCP towards achieving a desirable balance of the two objectives.

Keywords: Proof of Merit, agent-based simulation, decentralization, blockchain, sharing economy, ride sharing, matching

Suggested Citation

Zhang, Haozhao and Zhang, Zhe and Zheng, Eric and Jacob, Varghese, Proof-of-Merit: Harnessing the Computing Power used by Blockchain Consensus Mechanisms for Complex Transaction Generation (July 28, 2022). Available at SSRN: https://ssrn.com/abstract=4174889 or http://dx.doi.org/10.2139/ssrn.4174889

Haozhao Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Zhe Zhang

University of Texas at Dallas, Naveen Jindal School of Management ( email )

800 W Campbell Road
Richardson, TX Texas 75083-0688
United States

Eric Zheng

University of Texas at Dallas ( email )

800 W. Campbell Rd
Richardson, TX 75080
United States

Varghese Jacob

Naveen Jindal School of Management. University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States

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