Tug-of-war over Bitcoin symbolizing collusion in cryptocurrency.

Unlocking Fair Crypto: Are Collusion-Proof Transaction Fees Possible?

Beau Callahan in Tech & Innovation December 2025 • 4 min read.

"New research reveals the surprising limits of designing cryptocurrency systems that prevent miners and users from gaming the system."

Cryptocurrencies like Bitcoin promise a decentralized financial system, but a hidden challenge lurks beneath the surface: ensuring fair transaction processing. Miners, the entities that validate transactions and add them to the blockchain, are incentivized to prioritize transactions that offer higher fees. This creates an auction-like dynamic where users compete for faster processing, potentially leading to unfair outcomes if miners and users collude.

The question of designing transaction fee mechanisms (TFMs) that are both incentive-compatible (meaning they encourage honest behavior) and resistant to collusion has become a central focus of research. A seminal conjecture by Roughgarden [Rou21] asked whether a TFM could exist that satisfies both these criteria, specifically being resistant to 'off-chain agreements' (OCAs) where users and miners secretly collude for profit. This article explores recent research that sheds light on the surprising difficulties in achieving this goal.

This article will break down the core problem of collusion in cryptocurrency, explain the different approaches researchers are taking to tackle it, and discuss the implications of these findings for the future of decentralized finance. Whether you're a crypto enthusiast, a blockchain developer, or simply curious about the inner workings of digital currencies, this article will provide valuable insights into the quest for fairness in the crypto world.

The Collusion Conundrum: Why is it so Hard to Build a Fair System?

Tug-of-war over Bitcoin symbolizing collusion in cryptocurrency.

The heart of the problem lies in the potential for miners and users to form coalitions and exploit the system for their own benefit. Imagine a scenario where a miner and a user agree that the miner will prioritize the user's transactions in exchange for a cut of the profits. This 'off-chain agreement' undermines the intended fairness of the TFM, potentially disadvantaging other users who are not part of the collusion.

Designing mechanisms to prevent such collusion is incredibly complex. Researchers have explored various approaches, but they often run into fundamental limitations. One key challenge is that incentive compatibility for users (meaning they are motivated to bid honestly) can clash with the need to prevent collusion.

Side-Channel Proofness (SCP): This is a strong notion of collusion resistance, which ensures that no coalition of miners and a certain number of users can benefit from colluding.
Off-Chain Agreement (OCA)-proofness: A weaker notion than SCP, it focuses on preventing users and miners from making secret agreements to manipulate the system.
DSIC (Dominant Strategy Incentive-Compatible): Ensures users are always best off bidding truthfully, regardless of what others do.
MMIC (Myopic Miner Incentive-Compatible): Ensures miners are incentivized to follow the intended allocation rule.

Recent research has demonstrated the inherent trade-offs between these properties. For instance, Chung and Shi [CS23] showed that achieving DSIC while also satisfying a strong notion of collusion resistance (1-SCP) is impossible without resorting to trivial mechanisms that offer no benefit to miners or users. This suggests that designing 'good' TFMs that satisfy all desired properties might be fundamentally unattainable.

Implications and the Road Ahead: Can We Ever Achieve True Fairness?

The research discussed in this article paints a sobering picture of the challenges in designing collusion-resistant TFMs. While achieving perfect fairness might be impossible, researchers are continuing to explore alternative approaches that relax certain assumptions or introduce new tools to mitigate the risks of collusion. These include exploring randomized mechanisms, Bayesian assumptions, and cryptographic primitives. While the quest for a perfectly fair cryptocurrency system may be ongoing, understanding the barriers to collusion is crucial for building more robust and trustworthy decentralized finance applications.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2402.08564,

Title: Barriers To Collusion-Resistant Transaction Fee Mechanisms

Subject: cs.gt econ.th

Authors: Yotam Gafni, Aviv Yaish

Published: 13-02-2024

Everything You Need To Know

What is the main problem addressed when designing transaction fee mechanisms (TFMs) in cryptocurrencies?

The core problem revolves around collusion between miners and users. Miners, who validate transactions and add them to the blockchain, are incentivized to prioritize transactions with higher fees. This can lead to an auction-like dynamic where users compete for faster processing. Collusion occurs when miners and users form secret agreements, or 'off-chain agreements' (OCAs), to manipulate the system for profit, undermining the fairness of the TFM. This can disadvantage other users not involved in the collusion, making it challenging to design a system that's both incentive-compatible (encouraging honest behavior) and resistant to collusion.

What are the key concepts used to measure collusion resistance and incentive compatibility when evaluating TFMs?

Several key concepts are used. 'Side-Channel Proofness' (SCP) is a strong measure of collusion resistance, ensuring no coalition of miners and a certain number of users can benefit from colluding. 'Off-Chain Agreement' (OCA)-proofness focuses on preventing secret agreements between users and miners. 'DSIC' (Dominant Strategy Incentive-Compatible) ensures users are always best off bidding truthfully, regardless of others' actions. 'MMIC' (Myopic Miner Incentive-Compatible) ensures miners are incentivized to follow the intended allocation rule. The research highlights trade-offs between these properties, showing that achieving all desired properties simultaneously is incredibly difficult.

Why is achieving both DSIC and strong collusion resistance (like 1-SCP) so challenging in TFM design?

Recent research, such as the work of Chung and Shi [CS23], has shown that achieving DSIC while also satisfying a strong notion of collusion resistance (1-SCP) is impossible without resorting to trivial mechanisms. This means designing TFMs that ensure users are always incentivized to bid truthfully (DSIC) while simultaneously preventing any coalition of miners and a certain number of users from profiting from collusion (1-SCP) leads to TFMs that provide no benefit to miners or users. The trade-offs between these properties highlight the fundamental limitations in designing 'good' TFMs.

What are the potential implications of the research findings on the future of decentralized finance?

The research paints a sobering picture, suggesting that achieving perfect fairness in cryptocurrency transaction fee systems might be unattainable. However, this doesn't mean progress is impossible. The research helps us understand the barriers to collusion. Researchers are exploring alternative approaches that relax certain assumptions or incorporate new tools. These approaches include randomized mechanisms, Bayesian assumptions, and cryptographic primitives to mitigate the risks. This understanding is crucial for building more robust and trustworthy decentralized finance applications, even if perfect fairness remains an ongoing quest.

How do 'Off-Chain Agreements' (OCAs) undermine the fairness of transaction fee mechanisms?

OCAs are secret agreements between miners and users to manipulate the system for their mutual benefit, at the expense of others. In an OCA, a miner might prioritize a specific user's transactions in exchange for a cut of the profits, creating an unfair advantage. This undermines the intended function of the TFM, which is designed to allocate block space fairly based on fees or other criteria. OCAs subvert this mechanism, leading to a system where fairness is compromised, and certain participants can gain an unfair advantage over others. Preventing OCAs is a central goal of research into collusion-resistant TFMs.