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A Solomonic Solution to Ownership Disputes: An Application to Blockchain Front-Running

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  • Joshua S. Gans
  • Richard T. Holden

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 resolves Solomon's dilemma (using only ordinal preference information) and also 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.

Suggested Citation

  • Joshua S. Gans & Richard T. Holden, 2022. "A Solomonic Solution to Ownership Disputes: An Application to Blockchain Front-Running," NBER Working Papers 29780, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29780
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    Cited by:

    1. Joshua S. Gans & Richard Holden, 2022. "Mechanism Design Approaches to Blockchain Consensus," Papers 2206.10065, arXiv.org.
    2. Andrea Canidio & Vincent Danos, 2023. "Commitment Against Front Running Attacks," Papers 2301.13785, arXiv.org, revised Jul 2023.
    3. Andrea Canidio & Robin Fritsch, 2023. "Arbitrageurs' profits, LVR, and sandwich attacks: batch trading as an AMM design response," Papers 2307.02074, arXiv.org, revised Feb 2024.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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