Incentives for Harvesting Attack in Proof of Work Mining Pools

Abstract

PoW consensus largely depends on mining that mostly happens in the pools where Pay Per Share (PPS) and Pay Per Last N Shares (PPLNS) are the most common reward schemes that are offered to the affiliated miners by pool managers. In this paper, we demonstrate that in the system consisting of PPS and PPLNS pools, manager who governs the both pools may have incentive for a new type of “pool harvesting” attack that is harmful for honest miners. In order to profit from the attack on PPLNS pool manager declares that a non-existent miner A joins that pool. She then collects the portion of reward that corresponds to the mining power of the proclaimed miner A. We demonstrate that for the mining community, such unfavorable outcome is worsened by the manager incentives to misrepresent (or not report) the true power of PPS pools, which complicates unified estimation of the level of decentralization in blockchain.