Paper 2022/056

LedgerHedger: Gas Reservation for Smart-Contract Security

Abstract

Smart-contract ledger platforms, like Ethereum, rate-limit their workload with incentives. Users issue orders, called transactions, with assigned fees, and system operators, called miners, confirm them and receive the fees. The combination of limited throughput and varying demand results in a volatile fee market, where under-paying transactions are not confirmed. However, the security of prominent smart contracts, securing billions of dollars, critically relies on their transactions being confirmed in specific, future time frames. Despite theoretical and practical active efforts, guaranteeing timely confirmation remained an open problem. We present LedgerHedger, a two-party mechanism for assuring that a transaction will be confirmed in a target time frame. As the name implies, LedgerHedger employs hedging: An issuing party pays for a transaction in advance; the other party commits to bearing its required fee, even if it rises above the paid amount. Unlike regulated markets, there are no external enforcers, and the committing party can technically break her commitment. Due to the amounts at stake, relying on her altruism does not suffice. Therefore, LedgerHedger uses a combination of collateral deposits, giving rise to a game. The contract requires the issuer to deposit her payment and the committing party to deposit a collateral. During the target time frame, the latter should confirm the issuer's transaction if it exists, but is also capable of withdrawing the payment and the collateral if not. For a wide range of parameter values there is a subgame perfect equilibrium where both parties are incentivized to act as desired. We implement LedgerHedger and deploy it on an Ethereum test network, showing its efficacy and minor overhead.