Bitcoin Blockchain Dynamics: the Selfish-Mine Strategy in the Presence of Propagation Delay (1505.05343v2)

Abstract: In the context of the selfish-mine' strategy proposed by Eyal and Sirer, we study the effect of propagation delay on the evolution of the Bitcoin blockchain. First, we use a simplified Markov model that tracks the contrasting states of belief about the blockchain of a small pool of miners and therest of the community' to establish that the use of block-hiding strategies, such as selfish-mine, causes the rate of production of orphan blocks to increase. Then we use a spatial Poisson process model to study values of Eyal and Sirer's parameter $\gamma$, which denotes the proportion of the honest community that mine on a previously-secret block released by the pool in response to the mining of a block by the honest community. Finally, we use discrete-event simulation to study the behaviour of a network of Bitcoin miners, a proportion of which is colluding in using the selfish-mine strategy, under the assumption that there is a propagation delay in the communication of information between miners.

• The paper shows that propagation delays increase orphan block rates and enable selfish mining to yield excess rewards.
• It employs a continuous-time Markov chain and spatial modeling to quantify the impact of network latency on miner strategies.
• Simulation results indicate that variability in communication delays lowers the threshold for profitable selfish mining attacks.

Analyzing the Impact of Propagation Delays on Selfish Mining in Bitcoin Blockchain

This paper explores the effects of propagation delays on Bitcoin blockchain dynamics, particularly when a subset of miners employs the "selfish-mine" strategy. The authors use a combination of theoretical modeling and simulation to examine how these delays influence the blockchain's evolution and the potential advantages of selfish mining under varying network conditions.

Overview

The paper employs several analytical approaches, including a simplified continuous-time Markov chain model, to represent the different states of the blockchain as seen by honest miners and those following the selfish-mine strategy. The key focus is on propagation delays—times taken for information (newly mined blocks) to be communicated across the network—and their impact on the prevalence and resolution of blockchain forks.

Key Findings

1. Propagation Delay Impact: The presence of propagation delays was found to significantly increase the rate of orphan block creation, where blocks become redundant due to delays in communication within the network. The simulation reflects that under these conditions, even with a less-than-majority share of computational resources, selfish mining can yield disproportionate rewards by temporarily gaining the lead in blockchain forks.
2. Parameter $\gamma$ Analysis: The value of $\gamma$, representing the fraction of the honest network that mines on selfishly released blocks, is crucial. The paper models miner locations as a spatial Poisson process to estimate $\gamma$. Given realistic network latency distributions, $\gamma$ increases surprisingly fast with communication delay variability, often contradicting simpler theoretical predictions.
3. Simulation Results: Through computational experiments, it emerges that the existence of variability in network communication effectively reduces the pool size needed for selfish mining to be advantageous. For observed network scenarios, such variability allows $\gamma$ to be above zero, unlike deterministic settings where it is zero due to the geometric constraints of communication paths.
4. Detection of Dishonest Behavior: The paper identifies indicators for detecting selfish mining strategies, most notably the elevated rate of blockchain splits and orphan blocks. These patterns can serve as red flags that selfish mining is occurring.

Implications

For practitioners and researchers in Bitcoin and blockchain networks, this paper provides valuable insights into the dynamics when selfish strategies are employed under realistic network delays. It highlights the importance of addressing not just miner incentives but also the underlying network infrastructure and its imperfections.

1. Systems Design and Security: Understanding the conditions under which selfish mining becomes lucrative helps in designing more robust systems that are resilient to such attacks. Possible countermeasures could include enhancing communication protocols to reduce delay variability or devising incentive structures that discourage deviation from honest mining practices.
2. Blockchain Protocol Improvements: The paper suggests that to mitigate risks from selfish mining, improvements are necessary in how block validation and propagation are handled within the Bitcoin protocol. Faster resolution of blockchain splits and orphan blocks are crucial elements to focus on, potentially by optimizing network topology or using alternative consensus models.
3. Future Research Directions: The observed dynamics call for further exploration of strategies that could manipulate transaction ordering, efficiency of alternative consensus algorithms under network delays, and adaptive strategies by honest miners to counteract selfish mining efficiencies.

Overall, the paper's findings underscore the complexities introduced by network conditions in blockchain systems and demonstrate the need for a nuanced approach to ensure the long-term stability and fairness of these decentralized networks. The analysis serves as a foundation for developing strategic interventions tailored to real-world distributed network environments found in cryptocurrencies and other blockchain applications.