33,325 research outputs found
Majority is not Enough: Bitcoin Mining is Vulnerable
The Bitcoin cryptocurrency records its transactions in a public log called
the blockchain. Its security rests critically on the distributed protocol that
maintains the blockchain, run by participants called miners. Conventional
wisdom asserts that the protocol is incentive-compatible and secure against
colluding minority groups, i.e., it incentivizes miners to follow the protocol
as prescribed.
We show that the Bitcoin protocol is not incentive-compatible. We present an
attack with which colluding miners obtain a revenue larger than their fair
share. This attack can have significant consequences for Bitcoin: Rational
miners will prefer to join the selfish miners, and the colluding group will
increase in size until it becomes a majority. At this point, the Bitcoin system
ceases to be a decentralized currency.
Selfish mining is feasible for any group size of colluding miners. We propose
a practical modification to the Bitcoin protocol that protects against selfish
mining pools that command less than 1/4 of the resources. This threshold is
lower than the wrongly assumed 1/2 bound, but better than the current reality
where a group of any size can compromise the system
Socially Optimal Mining Pools
Mining for Bitcoins is a high-risk high-reward activity. Miners, seeking to
reduce their variance and earn steadier rewards, collaborate in pooling
strategies where they jointly mine for Bitcoins. Whenever some pool participant
is successful, the earned rewards are appropriately split among all pool
participants. Currently a dozen of different pooling strategies (i.e., methods
for distributing the rewards) are in use for Bitcoin mining.
We here propose a formal model of utility and social welfare for Bitcoin
mining (and analogous mining systems) based on the theory of discounted
expected utility, and next study pooling strategies that maximize the social
welfare of miners. Our main result shows that one of the pooling strategies
actually employed in practice--the so-called geometric pay pool--achieves the
optimal steady-state utility for miners when its parameters are set
appropriately.
Our results apply not only to Bitcoin mining pools, but any other form of
pooled mining or crowdsourcing computations where the participants engage in
repeated random trials towards a common goal, and where "partial" solutions can
be efficiently verified
Transaction Propagation on Permissionless Blockchains: Incentive and Routing Mechanisms
Existing permissionless blockchain solutions rely on peer-to-peer propagation
mechanisms, where nodes in a network transfer transaction they received to
their neighbors. Unfortunately, there is no explicit incentive for such
transaction propagation. Therefore, existing propagation mechanisms will not be
sustainable in a fully decentralized blockchain with rational nodes. In this
work, we formally define the problem of incentivizing nodes for transaction
propagation. We propose an incentive mechanism where each node involved in the
propagation of a transaction receives a share of the transaction fee. We also
show that our proposal is Sybil-proof. Furthermore, we combine the incentive
mechanism with smart routing to reduce the communication and storage costs at
the same time. The proposed routing mechanism reduces the redundant transaction
propagation from the size of the network to a factor of average shortest path
length. The routing mechanism is built upon a specific type of consensus
protocol where the round leader who creates the transaction block is known in
advance. Note that our routing mechanism is a generic one and can be adopted
independently from the incentive mechanism.Comment: 2018 Crypto Valley Conference on Blockchain Technolog
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