Who Needs Consensus? A Distributed Monetary System Between Rational Agents via Hearsay

We propose a novel distributed monetary system called Hearsay that tolerates both Byzantine and rational behavior without the need for agents to reach consensus on executed transactions. Recent work [5, 10, 15] has shown that distributed monetary systems do not require consensus and can operate using a broadcast primitive with weaker guarantees, such as reliable broadcast. However, these protocols assume that some number of agents may be Byzantine and the remaining agents are perfectly correct. For the application of a monetary system in which the agents are real people with economic interests, the assumption that agents are perfectly correct may be too strong. We expand upon this line of thought by weakening the assumption of correctness and instead adopting a fault tolerance model which allows up to $t < \frac{N}{3}$ agents to be Byzantine and the remaining agents to be rational. A rational agent is one which will deviate from the protocol if it is in their own best interest. Under this fault tolerance model, Hearsay implements a monetary system in which all rational agents achieve agreement on executed transactions. Moreover, Hearsay requires only a single broadcast per transaction. In order to incentivize rational agents to behave correctly in Hearsay, agents are rewarded with transaction fees for participation in the protocol and punished for noticeable deviations from the protocol. Additionally, Hearsay uses a novel broadcast primitive called Rational Reliable Broadcast to ensure that agents can broadcast messages under Hearsay's fault tolerance model. Rational Reliable Broadcast achieves equivalent guarantees to Byzantine Reliable Broadcast [7] but can tolerate the presence of rational agents. To show this, we prove that following the Rational Reliable Broadcast protocol constitutes a Nash equilibrium between rational agents and may therefore be of independent interest.