When cryptocurrencies mine their own business

Abstract

Bitcoin and hundreds of other cryptocurrencies employ a consensus protocol called Nakamoto consensus which rewards miners for maintaining a public blockchain. In this paper, we study the security of this protocol with respect to rational miners and show how a minority of the computation power can incentivize the rest of the network to accept a blockchain of the minority’s choice. By deviating from the mining protocol, a mining pool which controls at least 38.2% of the network’s total computational power can, with modest financial capacity, gain mining advantage over honest mining. Such an attack creates a longer valid blockchain by forking the honest blockchain, and the attacker’s blockchain need not disrupt any “legitimate” non-mining transactions present on the honest blockchain. By subverting the consensus protocol, the attacking pool can double-spend money or simply create a blockchain that pays mining rewards to the attacker’s pool. We show that our attacks are easy to encode in any Nakamoto-consensus-based cryptocurrency which supports a scripting language that is sufficiently expressive to encode its own mining puzzles.