Saito Consensus is the first decentralized consensus mechanism believed to be incentive compatible with the social choice rule of pareto optimality. Since understanding this statement requires a grasp on informational economics, we have a dedicated page discussing Leonid Hurwicz, Eric Maskin and implementation theory.
Since most readers are likely to be more familiar with computer science, this page focuses on debunking the impossibility proofs offered up by computer scientists which claim that a solution is not theoretically possible. The bedrock for these claims are a series of papers primarily by Tim Roughgarden and Elaine Shi. While there are several other papers which ,
There is a significant difference between a VCG auction with a trusted auctioneer, and a VCG auction run by a blockchain. That difference is whether users have the ability to collude with block producers
We have reached out to these academics by email, but . As such, the best we can do is share knowledge of the problem in the hopes that the quality of academic research and instruction will improve as more people focus on the actual problem.
In the language of implementation theory, routing work mechanisms are indirect mechanism with truthful preference revelation in the tradition of Hurwicz and Maskin. They meet the criteria Hurwicz and Jordan establish for iteratively converging on pareto optimality equilibria -- only uniquely as they lack the need for a trusted third-party to run the mechanism.
It does this by creating a combinatorial auction that forces trade-offs to hit the production and consumption of contending forms of utility simultaneously:
Rational users truthfully reveal their private valuations for the utility of all three goods by manipulating two strategic levers: the value of the bid (the transaction fee paid), and distribution strategy (how the bid is broadcast into the network).
Rational producers truthfully reveal their competitive advantage at collecting transaction fees and selling collusion goods through the strategy of including their own fees in blocks, an act which -- uniquely in Saito Consensus mechanism -- increases the efficiency of the overall economic system.
The mechanism achieves incentive compatibility because users who dictate any two forms of utility must let the third be set at market rates by the most efficient provider of that form of value. This process iterates towards optimality over time as the mechanism incentivizes producers to drive the network into a state of maximal fee-throughput by advantaging those who are most efficient at proposing such transitions in both the production of blocks and collection of payments.