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  5. A Solomonic Solution to Blockchain Front-Running

AEA Papers and Proceedings

ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)

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A Solomonic Solution to Blockchain Front-Running

  • Joshua S. Gans
  • Richard Holden
AEA Papers and Proceedings
vol. 113, May 2023
(pp. 248–52)
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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.

Citation

Gans, Joshua S., and Richard Holden. 2023. "A Solomonic Solution to Blockchain Front-Running." AEA Papers and Proceedings, 113: 248–52. DOI: 10.1257/pandp.20231029

Additional Materials

JEL Classification

  • D82 Asymmetric and Private Information; Mechanism Design
  • D86 Economics of Contract: Theory