Limitations on the Effectiveness of Decentralized Incentive Mechanisms

During the last decade of P2P research a lot of attention has been given to incentive mechanisms. While centralized incentive mechanisms are straightforward in their design, a long term challenge has been to create a decentralized incentive mechanism that can be used to effectively induce cooperation and reduce freeriding. While there have been many proposals of such mechanisms based on the spreading of reputation information, little attention has been given to the theoretical limitations of such designs. In this paper, we present a high level model of reputation-based incentive mechanisms. We derive upper bounds on the effectiveness of such mechanisms, especially with respect to the performance under behavioral change and population turnover. Moreover, we assess the effectiveness of a reputation overlay in BitTorrent, and show that while its tit-for-tat reciprocity algorithm provides incentives for uploading on the short term, it reduces the benefits of an integrated long term incentive mechanism. All in all, we offer important insights for the design of future incentive systems.