Incentive Design for Enhancing the Performance of Bitcoin SV’s Overlay Network

Level: MA
Responsible person: Dr. Sheng Nan Li, [Industry collaboration with BSV developer]
Keywords:  Proof-of-work, UTXO, Overlay network, Incentives design

The efficiency of Bitcoin SV’s (BSV) overlay network plays a crucial role in ensuring seamless transaction propagation, block dissemination, and overall network scalability. However, current node participation and relay mechanisms rely on voluntary cooperation without direct economic incentives, potentially leading to inefficiencies such as suboptimal transaction relay and network centralisation risks.

This thesis aims to develop a practical incentive structure that enhances the efficiency of BSV’s overlay network while preserving decentralization and security. To achieve this, the research will address the following key questions:

• What are the primary limitations of the current node incentive mechanisms in BSV’s overlay network?
• How can an incentive-driven approach improve transaction and block relay efficiency?
• What economic models, including game-theoretic frameworks, reputation-based systems, and microtransaction-based incentives, can be applied to optimize network participation while well aligning individual node behavior with overall network performance?

By leveraging empirical analysis, economic modeling, and simulations, this study contibutes to design a self-sustaining incentive mechanism that enhances the reliability, scalability, and economic sustainability of blockchain-based overlay networks. The findings could contribute to optimising blockchain infrastructure by fostering greater node participation, reducing inefficiencies, and ensuring long-term network viability.

References: 

[1] https://docs.bsvblockchain.org/network-topology/overlay-services
[2]https://www.youtube.com/watch?v=ho1N7w_cD2Y
[3]https://bsvblockchain.org/news/overlay-services-in-financial-services-revolutionizing-risk-assessment-and-data-integrity