On Power Splitting Games in Distributed Computation: The Case of Bitcoin Pooled Mining

On Power Splitting Games in Distributed Computation: The Case of Bitcoin Pooled Mining
On Power Splitting Games in Distributed Computation:
The Case of Bitcoin Pooled Mining
Loi Luu∗ , Ratul Saha∗ , Inian Parameshwaran∗ , Prateek Saxena∗ , Aquinas Hobor†,∗
∗
School of Computing, † Yale-NUS College, National University of Singapore
{loiluu, ratul, inian, prateeks, hobor}@comp.nus.edu.sg
Abstract—Several new services incentivize clients to compete in
solving large computation tasks in exchange for financial rewards.
This model of competitive distributed computation enables every
user connected to the Internet to participate in a game in which
he splits his computational power among a set of competing pools
— the game is called a computational power splitting game. We
formally model this game and show its utility in analyzing the
security of pool protocols that dictate how financial rewards are
shared among the members of a pool.
As a case study, we analyze the Bitcoin cryptocurrency which
attracts computing power roughly equivalent to billions of desktop machines, over 70% of which is organized into public pools.
We show that existing pool reward sharing protocols are insecure
in our game-theoretic analysis under an attack strategy called
the “block withholding attack”. This attack is a topic of debate,
initially thought to be ill-incentivized in today’s pool protocols:
i.e., causing a net loss to the attacker, and later argued to be
always profitable. Our analysis shows that the attack is always
well-incentivized in the long-run, but may not be so for a short
duration. This implies that existing pool protocols are insecure,
and if the attack is conducted systematically, Bitcoin pools
could lose millions of dollars worth in months. The equilibrium
state is a mixed strategy—that is—in equilibrium all clients are
incentivized to probabilistically attack to maximize their payoffs
rather than participate honestly. As a result, the Bitcoin network
is incentivized to waste a part of its resources simply to compete.
I. I NTRODUCTION
Distributed computation enables solving large computational problems by harnessing the availability of machines
connected to the Internet. A new paradigm of distributed
computation is emerging wherein participants contribute their
computational resources in exchange for direct financial gain
or monetary compensation. In this paradigm, all participants
compete in performing computation tasks to obtain rewards.
We call such computation competitive distributed computation.
There are many examples of such competitive distributed
computation today. Public challenges for testing the strength
of cryptographic constructions (e.g., the RSA Secret-Key challenge [1]) invites participants to find and exploit weaknesses
using huge computational resources in exchange for monetary
prizes. Crowd-sourced security testing of applications is an
emerging commercial industry (c.f. BugCrowd [2], CrowdCurity [3], the HeartBleed challenge [4]), wherein computation
is dedicated to penetration testing tasks in software. Here,
bug bounties are offered to the first participant that finds
exploitable bugs. Perhaps one of the most direct examples
of competitive distributed computation are cryptocurrencies,
such as Bitcoin, which attract computation power equivalent
to nearly a billion desktop computers. In cryptocurrencies,
participants—often called miners—solve cryptographic puzzles as “proof-of-work” [5] in exchange for obtaining rewards
in cryptocurrency coins.
Distributed computation scales by incentivizing large number of participants to contribute their computation power.
When the computation problems demand high resources,
participants resort to pooling their resources together in the
competition. This is both natural and useful as it reduces
the uncertainity or variance in obtaining rewards for the
pool participants. Typically, such computation pools have
a designated supervisor who is responsible for distributing
computation sub-tasks to users and distributing the reward
obtained from winning the competition. When such delegation
of computation tasks is in place, the question of designing fair
pool protocols—which ensure that each participant get paid for
the computation they perform and only for the computation
they perform—become important.
Problems with designing secure or fair pool protocols are
relatively less explored, especially in the setting of competitive
distributed computation. Previous work have investigated solutions to prevent participants from specific forms of cheating,
often considering a single supervisor system [6]. Indeed, for
example in Bitcoin pool protocols, techniques for preventing
misbehaving clients in a single pool are known and have
been implemented. For instance, solutions preventing unfair
supervisors, lazy clients who claim more than what they
have done, and hoarders that keep the results secret to gain
extra reward from it (e.g., by gaining lead time for another
competition) are known [6, 7, 8, 9]. Many other systems
such as the SETI@home project use redundancy to check for
mismatch in replicated computation tasks [10]. However, a
generic model for security analysis of pool protocols when
there are multiple competing supervisors is a subject of open
investigation.
There are some unique characteristics of competitive distributed computation that makes designing secure pool protocols difficult. First, solving the computation task is competitive. The first supervisor publishing the valuable results gets
the reward, and others get nothing. Here, the competition game
is zero-sum and timing is critically sensitive. For example,
in the RSA Secret-Key Challenge [1], a client once finds
a possible plaintext should submit to the group supervisor
immediately to claim for the reward, otherwise other groups
may find it and make the result obsolete. Second, the computation tasks can be delegated to anonymous participants—
in fact, the primary function of pool operators is to securely
delegate tasks. This opens up analysis of the incentives of the
participant which can decide to split its computation across
multiple supervisors. Protocols that may be secure in a single
supervisor setting [6] (e.g. with no delegation) are often used
in practice, but can turn out to be insecure in multiplesupervisor setting. Detecting if and how a participant splits
its power is difficult since participants are anonymous or can
form a large sybil sub-network. Thus, studying the incentive
behind the attack is an important goal.
The Computational Power Splitting Game. In this paper,
we introduce a new distributed computation model which
includes multiple supervisors competing with each other to
solve computationally large problems. Participants with computation power play a game of solving computation problems
by acting as a supervisor or joining other pools. We call
this the Computational Power Splitting game or the CPS
game. Participants have the choice to contribute their power to
one supervisor’s pool or anonymously spread it across many
pools. Each participant can choose to either follow the pool
protocol honestly or deviate from it arbitrarily. The goal of
each participant is to maximize its expected profits. A pool
protocol is secure with respect to the CPS game if following
the protocol maximizes each participant’s profit. We show
an example analysis of the CPS game in the this paper, to
illustrate how it acts as a powerful tool in analyzing protocols
in competitive distributed computation scenarios.
The Case Study on Bitcoin Network. Bitcoin [5] is the
largest cryptocurrency reaching a market capitalization of over
5.5 billion US dollars in 2014 [11]. Bitcoin is representative
of over 50 new cryptocurrencies or alt-coins which have
a similar structure. In Bitcoin, each participating client (or
miner) contributes computation power to solve cryptographic
puzzles in a process called block mining, which acts as
the basis for minting coins (Bitcoins). The computational
resources required for Bitcoin mining increases over time and
is already significant: finding a block in late 2014 requires
computing about 270 ≈ 1021 SHA-256 hashes; the Bitcoin
network as a whole finds a block approximately once every 10
minutes. Since the computational difficulty is high, most users
join mining pools, where they aggregate their computational
resources into a pool and share the reward. Pooled mining
constitutes 72% of the Bitcoin computation network today.
Bitcoin pools are a direct example of competitive distributed
computation. In each round of mining (which roughly takes
10 minutes), pools compete to solve the puzzle and the first
one to solve claims a set of newly minted Bitcoins. This can
be viewed as the CPS game. Each pool has a designated pool
supervisor or operator, who then distributes the earned rewards
among pool members using a pool protocol. Existing pool
protocols are designed carefully to block several attacks from
its anonymous miners [12]. For instance, the pool protocol
ensures that all blocks found by miners can only be reported
via the pool operator, thereby ensuring that a lucky miner
cannot claim the rewards directly from the network. However,
the answer to the question—does a miner maximize its profit
by following the pool protocol honestly?—is not yet known.
Findings. In our case study, we investigate the utility of one
cheating technique called block withholding (or BWH) using
the CPS game formulation of Bitcoin. In a block withholding
attack, when a miner finds a winning solution, he does not
submit it to the pool, nor can he directly submit it to the
Bitcoin network. Instead, he simply withholds the finding,
thereby undermining the overall earnings of all miners in
the victim pool, including himself. Existing pool protocols
are secure against this attack when one considers a single
pool in the system. However, when we carefully analyze the
existing popular pool protocols using our CPS-game formulation, we find that it is insecure. Specifically, we establish
that rational miners are well-incentivized to withhold blocks
and earn higher profits by being dishonest. In fact, a sybil
network of dishonest miners can cost pool operators large
fraction of their earnings (often millions of US Dollars per
month). This finding implies that big pools can dominate the
Bitcoin network by carrying out the BWH attack on new or
smaller pools, yet earning more reward than mining honestly
by themselves. We study the damage a set of miners (say
of one pool) can cause to another pool, and the conditions
under which such behavior is well-incentivized. We further
show that this game has no Nash equillibrium with pure
strategies; in fact, this implies that the pure strategy of all
players being honest is not a Nash equillibrium. As a result,
in the equillibrium state all miners are devoting some fraction
of computation for witholding rather than mining honestly,
and therefore the network as a whole is under-utilized. This
makes BWH a real threat to the viability of pooled mining
with existing protocols in cryptocurrencies.
We point out that witholding attacks are well-known, but
their efficacy is a topic of hot debate on Bitcoin forums [13,
14, 15] and recent papers [16, 17]. Intuition and popular belief
suggests that these attacks are ill-incentivized [13, 14, 15]
because in a single pool game, the attacker strictly loses
parts of their profits by withholding. However, we study the
incentives with respect to the general CPS game, in which we
show existing pool protocols to be insecure. The profitability
explains why one such real attack conducted on a Bitcoin
pool in April 2014 could indeed be well-incentivized, though
pool operators claimed that such attacks have no incentives
for attackers [18]. The attack caused nearly 200,000 USD
in damage to the victim pool. We further study whether the
attacks are profitable over a short period of time or over a long
period of time, and under what conditions.
Finally, we initiate a study on effective strategies to achieve
secure protocols in CPS games, specifically in the context of
Bitcoin. We discuss several public proposals to mitigate these
Game Network
P1
P2
αβ2
αβ1
αβ0
...
αβi
Pn
Pn+1
αβn
Player α
•
Fig. 1: The CPS game setup of n + 1 pools with respect to a player
with α fraction of total computational power in the game.
attacks in §VI. We recognize that for a defense to become
immediately practical on the existing Bitcoin network, it
should be non-intrusive, i.e., should require no incompatibility
with the existing Bitcoin protocol—however, our conclusion
in achieving a secure solution is still an open problem worthy
of future work. Finally, we hope that our work provides a
building block for designing cryptocurrencies which support
pooled mining natively in their core protocol, unlike Bitcoin.
Contributions. To summarize, this work makes the following
main contributions:
• Computational Power Splitting Game. We formulate a
new model of distributed computation as a CPS game, in
which multiple supervisors compete with each other in
exchange for final reward. We pose questions regarding
security of protocol, as a game-theoretic analysis.
• Analysis of BWH in Bitcoin pooled mining. Applying the
CPS model allows us to systematically study the security of pooled mining protocols in Bitcoin. We explain
why block withholding is well-incentivized for rational
miners, providing an algorithmic strategy to gain higher
rewards than honest mining. We confirm our findings by
experiments running real Bitcoin miners and pools on
Amazon EC2.
II. T HE C OMPUTATIONAL P OWER S PLITTING G AME
A player with non-zero computational power naturally has
the ability to choose among different ways of multihoming
among pools accessible to him. We intend to analyze strategies
for such a player to distribute his power into different pools
such that his net reward is maximum. We formulate this problem as a multi-player game where each player independently
and anonymously participates in.
A pool is accessible (inaccessible) to the player if he
can (cannot) anonymously join the pool. For simplicity, we
consider all inaccessible pools to be grouped into a single
inaccessible pool.
The Computational Power Splitting (CPS) game consists of:
• Computationally Difficult Problem T : A problem that
requires a large amount of computation to solve.
• Partition function φ(T ) → {T1 , T2 , .., Tn }: The function φ(T ) splits T into many smaller tasks Ti , such
that the difficulty of solving T is equivalent to the total
difficulty of solving all Ti . For example, in the RSA
Secret-Key challenge, the key value space X is split into
•
various Xi , each of which covers a specific range of
the key space and will be delegated to some particular
client to perform the search. Similarly, in crowd-sourced
scanner, each client will scan some particular set of
program paths to check if one is exploitable. The total
number of possible paths may be exponentially large.
Players: A client with positive computational power is a
player in this game who has a fraction of the total network
computational power. In this game, we study the behavior
of a miner who has a specific, say, α fraction of the total
computational power.
Information available to all players: There is a finite
set of n + 1 pools P = {P1 , P2 , . . . , Pn } ∪ {Pn+1 }
where P1 , P2 , . . . , Pn are accessible pools and Pn+1 is
the inaccessible one to the player. The computational
power function cp : P → (0, 1] describes the power of
each pool as a fraction of the total computational power
in the game. Thus, the total computational power in the
game is
n+1
X
α+
cp(Pi ) = 1.
i=1
Actions: For any particular player, a Strategy Distribution
Vector (SDV) β~ = (β0 , β1 , . . . , βn ) is defined such that
(i) the player plays privately with computational power
αβ0 ,
(ii) for each i ∈ {1, . . . , n}, the player mines in pool Pi
with contribution αβi power of the P
whole network,
n
(iii) 0 ≤ βi ≤ 1 ∀ i ∈ {0, 1, . . . , n} and i=0 βi = 1.
The player moves by choosing an SDV β~ for one game.
For simplicity, we assume that β~ remains constant for all
players in one game.
• Payoff Scheme: There is a payoff distribution scheme
applied in a pool where, irrespective of the internal implementation, an individual player’s payoff is proportional
to the number of smaller tasks Ti that he has solved.
• Utility: Let Ui denote the random variable describing the
reward the player receives from pool Pi by playing for
one game with βi fraction of his power α. Let
•
R=
n
X
Ui
i=1
denote the random variable representing total reward for
one game for the player. The player’s goal is to maximize
the expected reward E(R).
The CPS game formulation enables us to study a variety
of attack strategies that a player can carry out to maximize
his profit. Specifically, as a case study in this work, we
present a new strategy to utilize the block withholding attack in
Bitcoin pooled mining, that always rewards more than mining
honestly. Under this attack, a number of pools suffer financial
losses whereas the attacker gains a better reward than from
the honest strategy. Assumptions for the CPS game. For
simplicity, we make the following realistic assumptions about
the CPS game:
• A1. Other Players are Honest. The attacker is the only
rational player and hence is carrying out some attack.
The rest of the miners will pick the honest strategy, i.e,
following the protocol, unless explicitly specified. We
discuss effects of relaxing this assumption in Section V.
• A2. Known Power Distribution. The computational power
distribution of the game—including the accessibility and
payoff mechanism of all the pools—is correctly estimated
by the attacker at the start of the game. This is a fairly
practical assumption. For example, in Bitcoin, most of
the information is publicly available [19] and also easy
to estimate by listening on the Bitcoin network for a small
period of time.
• A3. Constant power distribution throughout the game. We
assume that the network state stays constant throughout
the game. In practice, if there is significant variation in
one game, it can be analyzed as multiple smaller games.
• A4. Independence of games. We assume that the reward
and the winner in one game have no effect on the
outcomes of another game. More specifically, finding a
solution in one game does not yield any advantage in
wining any subsequent ones.
We do not make any assumption about other properties of
the game state, e.g., the total computational power or the
problem difficulty remains constant across games. In fact,
in Section V, in the case study of Bitcoin pooled mining,
we show that these factors do not affect our analysis results
significantly. We also demonstrate that our analysis results for
Bitcoin pooled mining hold even without the assumptions A2
and A3.
III. A CASE STUDY OF B ITCOIN POOLED MINING
A. Background
Mining Bitcoins. Unlike traditional monetary systems, Bitcoin
is a decentralized crytocurrency with no central authority to
issue fiat currency [20]. In Bitcoin, the history of transactions
between users is stored in a global data structure called the
blockchain, which acts as a public ledger of who owns what.
Users perform two key functions: (i) verifying newly spent
transactions and (ii) creating a new block (or proof-of-work)
to include these transactions. In the Bitcoin protocol, both
these functions are achieved via an operation called mining, in
which a miner validates the new transactions broadcasted from
other users and in addition solves a computational puzzle to
demonstrate a proof-of-work [21], which is then verified by a
majority consensus protocol [5]. The first miner to demonstrate
a valid proof-of-work is said to have “found a block” and
is rewarded a new set of minted coins, which works as an
incentive to continue mining for blocks.
In terms of a CPS game, the computationally large problem
T in the Bitcoin protocol is based on the pre-image resistance
of a cryptographic hash function SHA-256 [22]. Specifically,
the puzzle involves finding a value whose hash begins with
some zero bits derived from a variable D, which represents the
global network difficulty. For each block, this value includes
the already computed hash for the previous block, information
of some transactions and a nonce — the miner’s goal is to find
a suitable nonce such that the hash of the corresponding block
has at least f (D) leading zeros [23]. The network self-adjusts
D after every 2016 blocks found, such that the time to find a
valid block is roughly 10 minutes. Relating to the CPS game
model, the search space X of T has the size |X| = 2|f (D)| .
At present, f (D) is roughly 70, thus the average hashrate
(H/s—the number of SHA-256 hash computations per second)
required to find a block in 10 minutes is around 1.96 × 1018
H/s. One can verify that with a standard computer having
a hashrate of 1 million H/s, a miner has to mine for on an
average of 62,000 years to find a block.
Pooled mining. The probability of an individual miner to find
a new block every 10 minutes is excruciatingly small, which
leads miners to combine their computational power into a
group or pool. If anyone in the pool finds a block, the block
reward is split among members according to their contributed
processing power. This shared mining approach is called
pooled mining, which effectively reduces the uncertainty or
“variance” in the reward for individual miners [12]. Typically,
the pool operates by asking its miners to solve easier problems
Ti with a smaller difficulty d (d < D) whose solution, called
d
to be the solution for the new block.
shares, has probability D
Shares do not have any real value other than acting as the main
reference when distributing the reward. For example, instead
of searching in a space of size |X| = 270 , the pooled miners
only need to search in a smaller space of size |Xi | = 240 ,
i.e., finding hashes with 40 leading zero bits. Every block is
trivially a valid share, because a hash value with 70 leading
zeros also has 40 leading zeros—however, the probability of
a share being a block is 1/230 .
When a member in a pool finds a share that is also a valid
block, the pool operator submits it to the Bitcoin blockchain
and distributes the claimed reward to all miners in the pool.
The pool protocol ensures that the work is distributed in a
way which prevents miners from directly claiming rewards
for found blocks, thereby forcing all rewards to be funneled
through the pool operator. 1
Payoff schemes in pooled mining. There are multiple ways
to design a fair reward distribution system in pooled mining [12]. Some of the popular schemes include (i) Pay-pershare (PPS)—where the expected reward per share is paid, (ii)
Pay-per-last-N-shares (PPLNS)—the last N submitted shares
are considered for payment when a block is found. While there
are differences among these schemes (and their variations), all
of them aim to distribute the reward such that the payoff of
an individual miner is proportional to the number of shares
he submitted, which in turn is proportional to his individual
computational power contributed to the pool.
The main question we study is, given a payoff scheme,
1 The block template clearly specifies who will receive the block reward,
i.e., the new coins and transaction fee. Thus, even when the miners claim the
valid block to the network, the reward still goes to the pool operator.
does the miner have incentive to follow the honest mining
strategy—i.e., to honestly contribute all of his available power
to pools to maximize his profit? Intuitively, if all pools employ
fair protocols and if the miner contributes his complete power
to one or more of them, he should receive rewards proportional
to his true computational power. We study the correctness
of this intuition and whether the attacker can systematically
exploit mining pools to extract higher profits.
B. Block Withholding (BWH) attack
Our focus in this paper is on studying the efficacy of one
attack strategy called block withholding to gain more reward.
When a pool is under BWH attack, the attacker submits all
shares he computes to the pool except shares which are also
valid blocks. Since these withheld blocks would have directly
translated into rewards for the pool, such an attack decreases
the overall profit of the pool, thereby decreasing the reward
for all individual miners in the pool including the attacker. For
example, later in § IV-E, we analytically and experimentally
show that miners in a pool with 25% of the total computational
power in the Bitcoin network will lose 10.31% of their reward,
if 20% of the pool carries out the BWH attack. Therefore,
a naive intuition may suggest that miners do not have any
incentive to conduct such an attack. We claim that this intuition
is against the rational choice for any miner.
To see if BWH attack is well-incentivized, we consider the
two extreme options for a miner—(i) to withhold all blocks or
(ii) to submit all found blocks honestly on a pool. In practice,
the attacker may withhold some of the blocks he finds and
our analysis can be easily extended to model this degree of
withholding behavior. With BWH attackers present, the overall
efficiency of a pool is no longer proportional to its miners’
actual total computational power—i.e. the overall reward generated by the pool is proportional only to the computational
power contributed by honest miners. Nonetheless, the reward
earned is shared equitably with all miners, proportional to their
submitted shares. This imbalance allows a miner to collect
(reduced) reward even from pools in which he withholds.
The Block Withholding Attack in the CPS game. To systematically study the attacker’s advantage, we define a version of
the CPS game called the CPS-BWH game. Specifically, the
following extension is made to the generic CPS game:
• When the attacker makes a move, in addition to choosing
the distribution β~ of his own computational power, he
also decides which pools to withhold in—denoted by the
attack vector ~γ = (γ1 , γ2 , . . . , γn ). The attack vector is
chosen such that γi = 1 if the attacker withholds all
blocks he finds in pool Pi and γi = 0 otherwise.
• All the assumptions stated in A1 — A4 (Section II) are
valid.
The goal is to find the optimal SDV (say) β~a and the attack
vector (say) γ~a , such that the expected gain over honest mining
is maximum. Let Rh denotes the expected reward with the
honest mining strategy, i.e., attack vector ~0. Similarly, let R
denotes the expected reward with the attack vector γ~a . Our
Fig. 2: Simple illustration of the BWH attack: if an attacker with
25% of the mining power of the network attacks Pool 1 with 5% of
the network mining power, he gains 25.72% of the reward instead of
the expected 25%.
goal is to maximize the expected gain, defined as
∆R =
R − Rh
.
Rh
Incentive for BWH attack. The main insight which incentivizes the BWH attack is that Bitcoin mining is a zero-sum
game, i.e. to find a block all pools compete and exactly one
pool wins by consensus, all others do not get any reward. In
this game, although the attacker’s reward drops in the pool
being victimized, this loss could be compensated from the
reward gained from other pools in which the attacker mines
honestly. The victim pool’s loss due to withholding translates
into better rewards for other pools competing in the game,
since pools with no withholding miners have a competitive
advantage of being rewarded a block. Thus, if the attacker
mines only on the victim pool, he will definitely share the loss
with the pool and earn less reward as in the aforementioned
intuition, i.e., the reward protocol is fair and secure in a single
supervisor system. However, when he also mines strategically
on another pool at the same time, his reward gain from that
pool may outweigh his loss on the victim pool and make his
overall extra reward positive.
To illustrate this, we show a concrete example (shown in
Figure 2) of two pools constituting the Bitcoin network. An
attacker with 25% computational power can split his power
— 5% to conduct a BWH attack on the first pool, while
mining honestly on the second pool with 20%. It is clear that
the attacker’s expected reward from the victim pool falls to
4.67% as intuition suggests. However, the total reward earned
by other pool increases, as the first pool’s loss shifts to the
second pool’s gain, and thus the attacker overall makes more
reward.
C. Approach overview
The example above shows the feasibility of a BWH attack.
To analyze the scenarios and the extent of damage to pools
and honest miners, we study the following research questions
in this work.
• Q1. We ask whether the attack is well-incentivized regardless of the number of pools, their respective computational power and the attacker’s computational power,
i.e., whether the attacker always has a strategy to gain
more reward than by mining honestly.
• Q2. Given that the BWH attack is well-incentivized,
rational miners will tend to attack the pools to gain extra
reward. This raises a question whether the attack is still
profitable when the pool is “contaminated” by, say, a
factor c, i.e., the BWH miners account for c fraction of
the mining power in the pool.
• Q3. We study the best strategy that maximizes the attacker’s expected reward when the attacker attacks one
or multiple pools.
• Q4. We seek the stable equilibrium in Bitcoin when block
withholding miners are participating in pooled mining.
To answer these questions, we leverage our CPS-BWH
game to study the behavior of miners. In this game, a miner is
considered to be a player, and he makes a move by distributing
his power to pools in order to maximize his reward. Our
theoretical analysis uses the CPS game formulation to address
questions Q1, Q2 and Q3 in several attack scenarios in § IV.
To empirically verify our analysis findings, we run experiments
in a custom Testnet Bitcoin network on Amazon EC2 using
roughly 70, 000 CPU-core-hours for several months with a
popular Bitcoin client [24], mining software [25] and pool
server software [26]. We answer question Q4 in § IV-F.
IV. B LOCK WITHHOLDING ATTACK A NALYSIS
Analysis overview. We discuss several Block withholding
attack scenarios in this section. In what follows, we treat E(R)
as R. Our goal is to find an optimal strategy for the attacker
such that his gain in expected reward is maximum. Table I
gives an illustrative overview of the attacker gain, given a
network distribution before the attack happens (as in Figure 3),
in several attack scenarios.
Discus Fish
GHash.io
30 %
15 %
KnCMiner
15 %
15 %
25 %
Unknown
Attacker
Fig. 3: Mining power distribution before the attack happens. This
constructive example is similar to the Bitcoin network state in
November 2014 [27].
§
IV-B
Scenario
One pool
Victim(s)
Discus Fish
All,
IV-C Multiple pools
except Unknown
One
Discus Fish,
IV-D
“contaminated” pool 2.5% is contaminated
Rh
R
∆R
25.00% 25.56% 2.26%
25.00% 26.19% 4.76%
25.64% 25.86% 0.89%
TABLE I: Example results of several attack scenarios that we study
in this paper given the pool distribution as in Figure 3.
In this section and the rest of the paper, for simplicity, we
use the term “private mining” to represent the honest mining
part of the attacker, which can be from solo mining or joining
a public pool. The careful reader may be concerned about the
high variance of reward in solo mining if the attacker’s mining
power is not large enough. However, it is easy to avoid that
by mining honestly on one pool and carrying out the attack on
the target pools to achieve similar expected reward with low
variance.
Experiment setup and goals. To support our analysis, we
run several experiments in our customized Testnet Bitcoin
network using computation resources from Amazon EC2. Each
experiment simulates the actual mining in the real Bitcoin
network for 2 to 3 months. The details of our experiment
setup and methodology are described in the full version of
this paper [28].
We argue that the empirical validation of Bitcoin attacks is
essential to check the correctness of our analysis and to show
that our CPS game is faithful to the actual Bitcoin mining
software implementation. An algebraic and probabilistic model
of computation used in previous work [29] does not capture
all the network factors (e.g., geographic placement, latency)
and Bitcoin network properties which may considerably affect
the validity of the numerical analysis. Thus, to our best
knowledge, this work is the first attempt to simulate the exact
mining behavior that models the underlying implementation.
Moreover, our experiments are motivated by discussions with
real Bitcoin pool operators, who suspected that variations in
difficulty, distribution of pool power, hashrates, etc., would
play a role in the total payoff of the attacker. Our experiments
in § V confirm that these intuitive misgivings do not affect
results significantly.
A. Intuition: Bitcoin network as one accessible pool
To demonstrate the intuition behind the BWH attack, we
start with a toy attack scenario where the whole Bitcoin
network is one large pool accessible to the attacker. We assume
that the pool P1 has computational power cp(P1 ) = 1 − α
and naturally the attack vector γ~a = (1). The attacker is the
only rational player in this game, i.e., aware of the BWH
strategy and the rest of the players are mining with honest
mining strategy. We assume that the attacker attacks with a
SDV (1 − β, β), i.e., he mines privately with α(1 − β) and
attacks pool P1 with αβ fraction of the network computational
power. However, if the attacker were mining honestly, the
expected reward would have been directly proportional to his
computational power, i.e. Rh = α, no matter how he chooses
the SDV.
In the attack, the fraction of computational power of P1
remains at (1 − α), while the reward generated has to be split
with 1−α(1−β) fraction of the network. Since only (1−αβ)
of the network is actually mining blocks now, the expected
reward for the attacker from private mining is
R0 =
α(1 − β)
.
1 − αβ
For P1 , the pool is rewarded
1−α
1−αβ
and, on average, the
∆R - % extra reward gained
12
B. Multiple pools: attack only one victim pool
β = 0.5
β = 0.4
β = 0.25
β = 0.2
β = 0.9
β=0
10
8
6
4
2
0
0
0.1
0.2
0.3
0.4
0.5
α - power of the attacker
Fig. 4: The attacker’s extra reward (∆R ) in the scenario where the
whole network is considered as one public pool. We plot reward gain
for several β to show that the attacker gains maximum reward when
β = 0.5.
expected reward for the attacker from the pool is
R1 =
αβ
1−α
×
.
1 − αβ
1 − α(1 − β)
Hence the total reward for the attacker is
R = R0 + R1 = 1 −
(1 − α)2
.
(1 − αβ)(1 + αβ − α)
Comparing the reward after attacking with that of the honest
mining, we get
R
αβ − αβ 2 + 1 − α
,
=
Rh
(1 − αβ)(1 + αβ − α)
and we prove in Appendix A that
∀α, β ∈ (0, 1),
R
> 1.
Rh
This shows that regardless of his mining power and the
strategy vector, the attacker always has an incentive to carry
a BWH attack in this particular scenario.
We also prove that for β = 0.5, the attacker gains maximum relative reward for any α in Appendix A. Thus, by
performing the attack, the attacker of power α gains maximum
α−α2
2
∆R = R/Rh − 1 = (2−α)
.
2 more than the original mining
More specifically, for α = 0.2, we have ∆R = 0.05, i.e. the
attacker obtains 5% more than mining with honest strategy.
We illustrate the percentage of extra reward that the attacker
gains corresponding to his power proportion in Figure 4.
Experimental evaluation. We evaluate our results when β =
0.5 for α = 0.2 and α = 0.4. As reported in Section A of
Table V, when α = 0.2, the attacker receives 20.78% of the
network reward, which is close to the 20.98% given by our
analysis. Similarly, the attacker receives 43.29% reward, which
is 8.2% higher than his honest reward, while controlling only
40% mining power of the network.
2 Our result differs here from the previous paper [16], because their analysis
overestimates R1 , thus giving imprecise result
We have established that if the attacker can access the
whole network, then by spending a fraction of his power for
withholding, he can gain extra reward. The intuition behind the
result is that the loss of the victim pool, which everyone joins,
will go to the private mining part of the attacker. However, in
a different attack scenario where part of the Bitcoin network
is not accessible to the attacker, or the attacker only wants to
attack a specific pool, the loss from the victim pool also pays
for the gain of other miners outside the victim pool. Thus, the
above result may or may not hold if the attacker spends too
much power on attacking the victim pool so that the gain from
the private part is not sufficient to compensate for his loss in
the victim pool. We study this scenario next.
To study the attack in this particular scenario, we assume
that there are two pools—one target pool P1 and one inaccessible 3 pool P2 . Let the computational power of P1 and P2
be p0 and (1 − p0 − α) respectively. The SDV is (1 − β, β),
i.e. the attacker mines privately with α(1 − β) and attacks
pool P1 with βα fraction of the whole Bitcoin network. Thus,
the computational power of P1 when the attack happens is
p = p0 + αβ.
Pool
Pool 1
Attacker
αβ
Other miners
p0
Pool(s) total
p = p0 + αβ
Pool 2
Solo
Total
0
α(1 − β)
α
1 − p0 − α
0
1−α
0
1 − p − α α(1 − β)
1
TABLE II: Mining power distribution when part of the network is
inaccessible to the attacker. Note that 0 < α, β, p < 1.
We now compute the expected reward for the attacker
similar to the previous analysis. The reward from honest
private mining is:
R0 =
α(1 − β)
.
1 − αβ
However, P1 has to split the reward to p fraction of the network
even though only p0 = p − αβ fraction is legitimately used for
actual mining. The reward that the attacker gets from pool P1
is
αβ
p − αβ
R1 =
×
.
1 − αβ
p
The reward R and the relative gain ∆R for the attacker are
−α2 β 2 + αp
,
p(1 − αβ)
R
αβ(p − β)
∆R =
−1=
.
Rh
p(1 − αβ)
R = R0 + R1 =
(1)
From Equation (1), we imply the following results.
Theorem IV-B.1 (Always withhold rule). The attacker always
gains more reward by mining dishonestly.
Proof. The attack gains extra reward
when ∆R > 0, or
p0
from (1) we have p > β, or β < 1−α
. Since p0 > 0 & α < 1,
there always exists β that helps the attacker to gain more
payoff regardless of α and p0 .
3 Either
it is inaccessible or the attacker chooses not to attack.
31.14
30
30
25.66
25
25.08
25
25
30
Rsim.
21.82
% reward
Rh
30.4
40
•
20
(0.25 0.4 0.1) (0.25 0.2 0.2) (0.25 0.2 0.35) (0.3 0.33 0.3) (0.3 0.33 0.4)
Setting of (α, β, p0 )
Fig. 5: Simulated reward Rsim and honest reward Rh of the attacker
α in different CPD-BWH game settings when he spends αβ power
to attack only one pool p0 .
An immediate consequence of Theorem IV-B.1 is that the
network state when all players are honest is not a Nash equilibrium. That is, in the Nash equilibrium state, at least some
of the miners are withholding, thereby wasting computational
resource for competitive gains.
Theorem IV-B.2 (Stay Low rule). The attacker of power α
gains more reward only when the power he spends on BWH
attacking a pool less than a specific threshold αβt .
Proof. Equation (1) also shows that the attacker will
gain
p0
. The
“negative” extra reward, i.e., start losing, if β > 1−α
p0
threshold value βt in Theorem IV-B.2 is 1−α
.
Theorem IV-B.3 (Target Big rule). The attacker has more
incentive to target big pools than small ones.
Proof. Equation (1) can be rewritten as
∆R =
αβ
αβ 2
− 0
.
(1 − αβ) (p + αβ)(1 − αβ)
With a given α, β, it clearly shows that ∆R is larger if p0 is
large (since p0 > 0), or the pool is big.
Theorem IV-B.4 (Best strategy). There exists a β that maximizes the attacker reward.
Proof. We prove that given the attacker power α, the target
pool power p0 , the attacker gets maximum payoff when
p
− −p02 (αp0 + α − 1)) − αp0 + p0
β = βmax =
,
α(α + p0 − 1)
if a + p0 < 1, otherwise β = 1/2.
Experimental evaluation. We have run several experiments
to simulate different CPD-BWH game settings in which the
value
β equal to, less than and greater than the threshold value
p0
.
We
illustrate our experiment results in Figure 5.
1−α
We discuss each of our theoretical results based on our
experimental results as following.
• Stay low rule. Our experiments show that, when β exp0
ceeds the threshold value 1−α
, the attacker will get less
payoff than from mining honestly. For example, when
p0 = 0.1, β = 0.4, α = 0.25, the attacker receives only
21.82% reward, thus making a relative loss of 12.72%.
On the other hand, when p0 = 0.35, α = 0.25, β = 0.2 <
0.35
1−0.25 = 0.47, he earns 25.65% reward, which is 2.64%
•
relatively more.
Target big rule. This rule easily applies to our experiment
results. Specifically, given a specific α = 0.25, β = 0.2,
reward that the attacker earns from carrying out BWH
attack is more when target the pool of p0 = 0.35 (R =
25.66%) than to the pool of p0 = 0.2 (R = 25.08%).
We experience the same results for the setting of α =
0.3, β = 0.33 and two targeted pools of size 0.3 and 0.4.
Thus, our experiments support our Theorem IV-B.3.
Always withhold rule and Best strategy rule. Our existing
experimental results for α = 0.25 and α = 0.3 show
that the attacker always has incentive to cheat, i.e., BWH
attack, the pool if he keeps his β smaller than the threshold. The Always withhold rule holds in our experiments
although we were not able to split our resource to even
finer grained settings, say α = 1%, to intensively verify
them.
C. Mutilple pools: Attack as many as possible
We now consider a general strategy to attack a set of pools
such that the SDV is (β0 , β1 , . . . , βn ) and the attack vector
(γ1 , γ2 , . . . , γn ). From § IV-B and § IV-A, one clear intuition
is to attack every pool that the attacker can access. In this
section, we formally study the intuition and find the best
strategy for the attacker to gain maximum profit.
The expected reward for attacker from pool Pi is
αβi
cp(Pi )
Pn
×
, if Pi is attacked,
cp(Pi ) + αβi
1 − α i=1 βi γi
1−α
αβ
Pni
i=1
βi γ i
, if Pi is not attacked.
Thus the total reward for the attacker is
n X
cp(Pi )
αβi
Pn
× γi
R=
×
cp(P
1
−
α
β
γ
i ) + αβi
i=1 i i
i=1
αβ
Pni
+
× (1 − γi ) .
1 − α i=1 βi γi
(2)
Finally, the extra reward that the attacker receives is
∆R = R/Rh − 1
X
1 − αβi
αβi (cp(Pi ) + αβi − βi )
P
=
×
1 − α γi =1 βi
(1 − αβi )(cp(Pi ) + αβi )
1≤i,γi =1
X
1 − αβi
P
=
× ∆i
(3)
1 − α γi =1 βi
1≤i,γi =1
Note that the term ∆i is the reward gain (∆Ri ) that the
attacker gets when he only attacks pool Pi as shown in
Equation (1). Since
∀ βi ∈ [0, 1],
1 − αβi
P
≥ 1,
1 − α γi =1 βi
the attacker always gains more reward if he follows the Stay
low rule in each pool. From (3), it is clear that attacking one
pool, say P2 (β2 > 0), will make the extra reward in another
pool, say P1 , bigger and vice versa. Hence, as proved in
Appendix A.3, ∀i γi = 1 will give the attacker the maximum
reward, i.e., he is well-incentivized to attack all the pools
he can access and privately mine with the rest of his power.
However, as explained earlier in this section, if the variance
in private mining is a concern, the attacker can honestly mine
in one pool and attack the rest.
Thus, the Best strategy problem is simply finding the optimal SDV (β0 , β1 , . . . , βn ) such that R is maximum given ~γ =
(1, 1, . . . , 1). One can use a variety of optimization techniques
to find the optimal value. As an example, we have performed
Sequential Least Squares Programming technique [30] with
this strategy on the scenario illustrated in Figure 3. We have
found that the optimal SDV is
(0.60644771, 0.19677677, 0.09838776, 0.09838776)
i.e., to mine privately with 0.60644771 fraction of the
attacker’s power, attack Discus Fish with 0.19677677,
Ghash.io with 0.09838776 and KnCMiner with
0.09838776. The corresponding reward that the attacker
receives is 26.19%, which is 4.76% relatively better than his
honest reward.
Experimental evaluation. We run an experiment with the
above optimal SDV setting and the reward that the attacker
of 25% mining power receives accounts for 26.23% of the
network reward, which is 4.92% higher than the honest reward.
Moreover, our experimental result is close to our analytical
result with an experimental error of 0.15% (see Section B,
Table V).
D. BWH when dishonest miners dominate Bitcoin
In the analysis in § IV-B, we assume that all miners except
the attacker are honest. We now consider the case of more
than one player being rational and incentivized to carry out the
BWH attack. Hence, our attack scenario is quite similar to that
in § IV-B with two pools P1 , P2 of mining power p0 and 1 −
α − p0 respectively, except that P1 includes a “contaminated”
or attacking fraction c (0 < c < p0 ) in its computational
power. For simplicity, we also assume that miners in Pool P2
are all honest. Intuitively, the reward when the attacker mines
privately honestly is
α
> α,
Rh =
1−c
since he can enjoy the loss from the contaminated pool. In this
section, we ask whether the attacker still gains reward higher
α
by attacking P1 . If so, we further study the validity
than 1−c
of Theorems IV-B.1, IV-B.2 , IV-B.3, and IV-B.4 in this new
scenario.
Our CPS game now has an SDV β~a = (1 − β, β) and an
attack vector γ~a = (1). Thus the power distribution will be as
in Table III.
The analysis is analogous to the previous analyses, but with
only (1 − αβ − c) power of the network is mining. Thus, the
Pool
P1
Attacker
αβ
Other Dishonest
c
miners Honest
p0 − c
0
Pool(s) total
p = p + αβ
P2
Solo
Total
0
α(1 − β)
α
0
0
c
0
1−p −α
0
1−α−c
0
1 − p − α α(1 − β)
1
TABLE III: Mining power distribution while there is other dishonest
miners, in P1 . When c = 0, we have the distribution in § IV-B.
α
0.2
0.4
β
c
p0
0.125
0.125
0.25
0.125
0.125
0.25
0.05
0.05
0.1
0.025
0.025
0.05
0.35
0.4
0.35
0.375
0.325
0.3
R
Theory
21.32%
21.14%
21.08%
42.29%
42.16%
42.64%
Sim.
20.98%
21.27%
20.77%
42.30%
41.74%
41.87%
Rh
21.05%
21.05%
22.22%
41.02%
41.02%
42.11%
∆R
Sim.
-0.33%
1.00%
-6.43%
3.33%
1.76%
-0.57%
TABLE IV: The reward R and relative reward ∆R gained by attacker
when there is already a “contamination” factor of c in the pool. We
report the expected (theoretical) results (Theory column) as well as
our simulation results (Sim. column) of R and ∆R in each game.
reward that the attacker will get is as following:
(1 − β)α
(private mining),
1 − c − αβ
p − αβ − c
αβ
×
(from pool P1 ),
R1 =
p
1 − c − αβ
pα − α2 β 2 − αβc
R = R0 + R1 =
.
p(1 − αβ − c)
R0 =
(4)
Thus, the attacker gets extra reward by conducting a BWH
attack when:
R > Rh ⇔
α
pα − α2 β 2 − αβc
≥
p(1 − αβ − c)
1−c
p0 α − c(1 − c)
⇔β≤
.
α(1 − α − c)
(5)
Equation (5) shows that, if
p0 α − c(1 − c) ≤ 0, or α <
c(1 − c)
,
p0
the attacker will lose out regardless of the strategy that he
uses to attack Pool 1. Thus it also shows that, the Always
withhold rule in the previous analysis does not hold if α <
c(1−c)
p0 . However, the following rules still apply and our the
experimental results reported in Table IV.
•
•
•
0
α−c(1−c)
, the attacker will get
Stay Low Rule. If β > pα(1−α−c)
less payoff than from mining honestly. For example, if
α = 0.20, c = 0.05, p0 = 0.35, the attacker loses his
reward (R = 20.77% < Rh = 22.22%) if he uses β =
0.25 to attack. On the other hand, in the first and second
experiment, he still earns more if he attacks with β =
0.125 which is smaller than the threshold in (5).
Target Big Rule. With a given α, β, c, Equation (4) shows
that R is large if p0 is large, i.e., the pool is big. Thus,
the rule still holds. For example, with the same setting
of (α = 0.4, c = 0.025, β = 0.125), the attacker gets
more reward when targeting a pool with p0 = 0.375
(R = 42.30%) than another one with p0 = 0.325
(R = 41.74%).
Best strategy Rule. When α < c(1−c)
p0 , there exists a
0
No.
∆P - % reward loss
p0 = 0.2 p0 = 0.3
−20
0
p = 0.15
−40
p = 0.3 p = 0.4
p0 = 0.35
∆P (theory) c = 0.1
∆P (sim.) c = 0.1
∆P (theory) c = 0.05
∆P (sim.) c = 0.05
p0 = 0.1
−60
0.1
0
0
0.2
0.3
0.4
Settings
R
EErr
α
β p0
c
Sim.
Theory
A. Bitcoin as one pool
1
0.2 0.5 0.8
20.78% 20.98% 0.95%
0
2
0.4 0.5 0.6
43.29% 43.75% 1.05%
B. Attack multiple pools
1 0.25 Strategy in § IV-C 26.23
26.19 0.15%
1 0.25
Strategy in § V
26.49%
N/A
N/A
#. of
blocks
10929
6507
2905
10934
TABLE V: The theoretical and experimental rewards for several
experiment settings. The parameters are α: attacker’s power, β:
amount of power that attacker uses for BWH attack, p0 : the pool
power before the attack and c: the fraction of BWH attacker already
in the pool.
p0 - Pool size before the attack
Fig. 6: The pool’s loss in experiments and in theory for different pool
size (p0 ) and contaminated factor (c).
dishonest strategy for the attacker to maximize his reward.
The value β for that strategy is the value that maximizes
the Equation (4).
E. Quantifying loss for honest miners
In this section, we discuss the loss of the pool when the
BWH attack happens. Intuitively, the pool of size p0 , when
attacked by a power of c fraction, will receive only the
following reward:
p0
p0
× 0
≤ p0 .
1−c p +c
We take the scenario when (α, β, p ) = (0.2, 0.25, 0.2) as an
example. The honest miners in the pool lose ∆P = 10.31% of
their reward, although the attacker does not gain or lose any
reward. That is because other miners outside the target pool
also enjoy the gain, even though they do not attack the pool.
We plot the theoretical and experimental loss of the pool in
Figure 6.
Although big victim pools bring more reward to the attacker
compared to smaller ones, the pool of smaller size will have
to bear much more damage than the bigger one. For example,
a contaminated factor of c = 0.05 causes a 15%-pool around
20% loss in reward, almost twice as much as the 10.31% loss
to a 20%-pool.
0
Relating to current Bitcoin network. Our experiments show
that, the pool of size 30% (p0 = 0.3)—size of the real biggest
pool as of November 2014—will lose 9.94% of its reward if
attacked with a contamination power of c = 0.05. Given the
price of a B is 350 US Dollars in November 2014 and the
attack happens for one month, it may cost Discus Fish miners
around 1 million USD per month.
F. The Nash Equilibrium
Since we have shown that the BWH attack is profitable
and causes a serious loss to honest miners, the implication
is that rational miners will be incentivized to form a private
group and carry out the attack widely. We study whether there
exists a Nash equilibrium with a pure strategy in this game.
Specifically, does there exist a deterministic attack strategy for
each miner? For sake of simplicity, we assume that the Bitcoin
network comprises of only two accessible pools P1 and P2 ,
each has only one miner with computational power α1 , α2
respectively. We also assume that P1 and P2 are both rational
and motivated to perform the BWH attack on the other pool
with c1 (c1 < α1 ) and c2 (c2 < α2 ) power. Before each miner
makes a move, the network state is known to everyone. The
goal of them is to adjust their attacking power ci properly to
achieve higher reward.
We show that there exists no pure strategy for the miner
in this two-pool setting. Thus, this game has only a mixed
strategy 4 in its equilibrium. For any network state, the miner
always has a strategy to win back the game. To arrive at this
result, we prove the following Theorem IV-F.1.
Theorem IV-F.1. In the two-pool game, given any network
state, if the player i ∈ 1, 2 has picked a strategy with
ci fraction of his computational power to attack, then the
opponent has a strategy to gain more reward in the game.
Proof. In the two-pool game, given (α1 , α2 , c2 ), P1 wants to
determine c1 that optimizes his payout R1 , which is computed
in the same fashion as in previous sections:
R1 =
1
(α1 − c1 )2
c1 (α2 − c2 )
(
+
).
1 − c1 − c2 α1 − c1 + c2
α2 − c2 + c1
Similarly, P2 wants to maximize R2 given α1 , α2 , and c1 ,
R2 =
1
(α2 − c2 )2
c2 (α1 − c1 )
(
+
).
1 − c1 − c2 α2 − c2 + c1
α1 − c1 + c2
As we prove in Appendix A, for any given network state,
there exists a ci value for the miner Pi to increase his reward
Ri and cause the other pool a loss.
Theorem IV-F.1 implies that being honest is not the best
strategy in Bitcoin pooled mining. Since there exists a mixed
strategy, a fraction of the network is always dishonest (probabilistically across many games) and the overall network
resource is under-utilized.
V. D O NETWORK STATE AND GAME DURATION MATTER ?
This section is partially motivated from our discussion with
Bitcoin pool operators to address concerns that variations
in difficulty, distribution of pool power, hashrates and other
parameters would not affect our findings.
4 In a mixed strategy, the player picks one of the many pure strategies
randomly.
100% Hashrate
Difficulty
90% 80% 1.5
1
Difficulty D
Hashrate (H/s)
1.5
0.5
1
30% 0
0
0
0.1
0
0
0
0
0
0.09
0.08
0.15
0.14
0.20
60% 0
0.1
0.09
26% 0.08
0.08
50% 40% 0.07
0.13
24% 0
0.2
30% Unknown 28% 70% 0.18
0.17
0.15
0.14
0.13
20% 22% A"acker Reward 2
Propo/on of mining power 2
·108
KNC Ghash Discus Fish A3acker Reward 1
32,000 34,000 36,000 38,000 40,000
0
Block number
Fig. 7: Hashrate & difficulty of the network in our experiment in § V.
A. Is it necessary to have a constant network state?
Our aim in this experiment is to show that the attacker gains
additional reward even when both the total mining power, the
network difficulty, and the power distribution are not stable.
We perform a final set of experiments simulating changes in
network. We also show that the attacker only adjusts his power
distribution after every change in the network state happens.
We only keep the attacker power α as constant as a fraction of
the entire network power, but the difficulty D, the total power,
the pool power distribution cp and the vector β~ will change
frequently during this set of experiments. We only use the best
strategy vector β~ for the attacker initially. When the network
state changes, it takes some time for the attacker to adjust his
~ Thus after the first change, the exact power distribution of
β.
the current network is no longer available to the attacker.
Typically, we start with the same setup as in § IV-C where
the attacker attacks multiple pools and add more mining power
to the network for five times. We allocate the additional power
to the pools but still keep α = 0.25. We only adjust the β~ of
the attacker strategy corresponding to the distribution after the
i-th change when the next (i + 1-th) change happens.
The power and difficulty changes in our experiments are
illustrated in Figure 7. The attacker’s power distribution,
β~ value, and the attacker’s reward after each change are
illustrated in Figure 8. The attacker always receives more than
25% of the reward and has a net gain of 5.96%. This confirms
that our assumption about the constant distribution power is
fair and practical. Our experimental results also imply two
additional important points. First, network state fluctuation
does not have any significant impact on the attacker gain, as
we expected. Second, since the power distribution change may
require the attacker some time to recognize, one “safe strategy”
is to set all βi lower than the value in best strategy and adjust
them later when the attacker is aware of the change. This
“safe strategy” will secure the positive gain for the attacker
even when he is not able to immediately recognize the power
distribution change.
B. Does duration of BWH attack matter?
In our analysis, we have have ignored the variation in
duration of each game and take into account only the profit of
10% 0.6
0.64
0.67
0.62
0.64
0.53
0% 20% Before 1st 2nd 3rd 4th 5th 6th a3ack change change change change change change Fig. 8: Power distribution, attacker’s strategy and reward vary several
times in our experiment. The number in the white box represents
the β of the attacker for that pool. The attacker reward, however, is
always greater than the reward he receives when mining honestly.
the attacker. However, a more meaningful factor to consider
is the rate of reward, say per day. Thus, although we have
shown that the BWH attack yields a net profit in a game, it
is not always the case that the rate of reward is strictly better.
In fact, we show that the attacker most likely gains profit by
carrying out the attack in a long period of time, but that may
not hold in the short term one.
Short-term profit. When BWH attack happens, a fraction of
the network is wasted performing the attack, thus taking the
network longer to find a block, i.e., finish the game. In fact,
the attacker gets better rate of reward in a game only if the
condition in Condition V-B.1 holds.
Condition V-B.1. A miner with computational power α using
c as the contamination factor to attack will only gain higher
c
rate of reward if: ∆αR > 1−c
Here, ∆R is the extra reward computed in our various
analysis scenarios in § IV. We prove Condition V-B.1 in
Appendix A.
Condition V-B.1 implies that in a short period of time,
whether the attacker’s rate of reward increases depends on
various factors, e.g., c, α, although his reward per game gets
increased.
Long-term profit. We show that, in a longer duration, the
BWH attack allows rational miners to gain higher rate of
reward. The following theorems establishes the claim.
Theorem V-B.2. Over any fixed number of games, a rational
miner always gains more absolute reward by withholding.
Proof. We have established that there exists a mixed-strategy
for the rational miner to maximize his absolute reward in a
game, albeit at a different rate of reward than honest mining.
Thus, when the attacker plays his mixed- strategy in every
game, his total reward in any number of games will be strictly
more than that by honest mining.
Note that in a long period of time, the number of blocks
mined (or games played) remains constant. This is because Bit-
coin is a self- adjusting network, i.e., the difficulty D adjusts
after every 2, 016 blocks (~2 weeks), making the average time
for a block 10 minutes. This accounts for any computational
power lost due to withholding. Therefore, the number of
blocks solved in a sufficiently long duration stay constant,
which is consistent with the empirical observation [31]. Since
the number of games over a given time period (say 3 months)
stays constant, Theorem V-B.2 implies that the BWH attack
is profitable.
VI. D ISCUSSION OF D EFENSES
As the attack becomes better understood it may be widely
used, unless countermeasures are developed. Rational miners
will face a troubling choice: mine honestly solo or in private
pools with those they trust, or—if dishonest—attack any
accessible pool in which honest miners operate. In this section
we first discuss about how to detect a possible BWH attacker
in a pool. We then describe several fixes and their drawbacks.
A. Desired properties
In order to determine whether a fix is adequate and practical,
we propose a set of desired properties for a pool and a fix. A
pool is considered ideal if
• P1. It does not favor either big or small miners, and
should treat them equally as long as they are honest.
• P2. It disincentivizes both pool operator and miners to
drop valid blocks.
The current pooled mining protocol does not satisfy P2,
thus making a fix necessary. We also define several practical
properties required in a desirable fix—these are specific to
Bitcoin and may or may not apply in other CPS applications.
• P3. It preserves the existing Bitcoin blockchain.
• P4. It is compatible with existing mining hardware.
• P5. It does not affect miners who are not in the pool.
• P6. It requires only a minor Bitcoin protocol’s change.
• P7. It does not make the pool violate P1 or P2.
One possible approach to eliminate the attack and satisfy
all properties is to detect the attacker early. We introduce two
detection tests using statistics and cross checking technique,
then explain why these tests are not robust in the full version
of our paper [28].
B. Change to payoff scheme
One of the main reasons that make the BWH attack profitable is that every share has the same value from the miner’s
perspective. Thus, we propose that some shares which are also
valid blocks should be considered to be more valuable than
others. While this intuition is well founded, the key question
is how much more reward is necessary for these shares.
More specifically, we propose to pay a fraction (say x) of the
block reward directly to the block founder. We aim to find the
smallest x that incentivizes attackers to not drop blocks. We
prove that this reward scheme is still fair, i.e., proportional to
the computational power contribution, in the full version of our
paper [28]. Since the reward for carrying out the BWH attack
depends on the amount of computational power α controlled
by the attacker, it makes sense that x depends on α. In fact,
in Appendix B, we prove that x = α is the smallest fraction
necessary to dissuade an attacker completely. For example, to
incentivize an attacker with α = 0.25 to submit blocks, the
valid-block share must be worth x = 25% of the block reward.
Drawbacks. Although this technique satisfies the above properties P3 to P6, it suffers from several drawbacks:
• P1 breaks down: normal shares are worth significantly
lesser. Thus, compared to the current experience in pools,
variance increases for all pool participants and especially
for smaller ones.
• Fundamentally, the technique does not prevent the attack,
but merely disincentivizes it. Attackers may have other
reasons to attack (such as a desire to discredit the Bitcoin
ecosystem by a disapproving state-sponsored actor).
C. Bitcoin protocol with native support for pooled mining
As argued above, changing payoff schemes does not prevent
the BWH attack completely. Thus, can we change the Bitcoin
protocol to prevent the threat? Despite the fact that the BWH
attack has been a controversial topic, some researchers have
proposed fixes to mitigate the attack. Till date we know of
two proposed solutions, both of which require changes in the
proof-of-work (PoW) algorithm [32, 12]. The general idea of
these approaches is to not allow miners to recognize which
shares are valid blocks, thus preventing dishonest miners from
withholding blocks at will.
The first solution is by Luke Dashjr, who proposed to
include the hash of the next block candidate in the PoW of
the current block [32]. Thus, the miners never know which
share is a valid block until the subsequent block is also found.
This solution can defeat the attack but changes the Bitcoin
protocol significantly — violating property P4 and P6, which
the Bitcoin community is highly reluctant to do. Furthermore,
it changes the blockchain structure and affects solo miners a
lot. For example, it takes a longer time to validate a transaction
now, thus violating property P5.
In [12], Rosenfeld proposes a solution which requires a
smaller modification than the above solution by introducing
the oblivious share concept to ensure that a miner is unable
to determine if a share is a valid block. More specifically, he
suggests a two-part PoW with 3 additional fields in each block,
namely SecretSeed, ExtraHash and SecretHash, in
which ExtraHash= SHA256(SecretSeed). The two-part
PoW works as follows.
• The hard (public) part. The ExtraHash is included in
the block header which is given to the miner to try all
possible Nonce values. A hash is a valid share iff it
satisfies difficulty d1 .
• The easy (secret) part. The pool operator will compute
SecretHash = SHA256(SecretSeed || Share)
and check if it satisfies a difficulty d2 . If so, the
SecretHash is also a valid block and the operator will
broadcast it to the network. Since only the pool operator
obtains the SecretSeed, miners do not know which
share is a valid block.
In the above PoW, the total difficulty of both parts d1 + d2
is greater or equal to the network difficulty D. Thus, miners
that mine privately may not need to split the mining into two
parts but only set d2 = 0 & d1 = D to mine as they do at
present.
Drawbacks. We find that this proposal is quite simple and
easier to implement. It satisfies all properties mentioned above
except the P2, i.e., it is not compatible to the current ASIC
(application-specific integrated circuit) miners [33, 34], which
is a substantial mining force in Bitcoin currently.
VII. R ELATED WORK
Detection Cheating in Distributed computation. Numerous
previous works have considered distributed computation tasks
which are not competitive or time-sensitive, and often consider a single supervisor system rather than one with many
supervisors outsourcing tasks [6]. One practical line of work
which focuses more on detecting cheating clients in distributed
computation [6, 8, 7]. A complimentary line of work studies
the problem of verifiable computing, which enables checking if
an arbitrary program has computed correctly from designated
inputs using cryptographic constructions or using trusted hardware [35, 36, 37, 38, 39, 40, 41]. These techniques can help in
ensuring that the pool protocol is strictly followed, disallowing
players from diveating from prescribed behavior. In contrast,
our work studies the question of eliminating the incentives for
cheating by using secure payoff schemes.
Block withholding attacks. BWH attacks have been a subject
of a few recent papers. In [12], Rosenfeld et al. discusses
BWH and considers it as a non-incentivized sabotaging attack,
simply to sabotage the pool profits. Recently, an initial work
by Nicolas et al. showed that the BWH is possibly profitable
and well-incentivized [16]. However, the analysis in [16] is
inordinately abstract and an overestimation leads to imprecise
results, as we explain in the footnote of § IV-A. Further, their
work only analyzes a simplified case where the whole network
is one large pool (a special case of our analysis in § IV-A).
We are aware of a recent paper, concurrent and independent
to our work, that discusses how pools can use BWH attacks
to infiltrate each other [17]. We have privately communicated
with the author of [17] in November 2014. The two works
are similar—we approach the problem of understanding the
incentive structure for miners in an arbitrary CPS game,
where the concurrent work aims to calculate infiltration rates
of pools at war. Both [17] and our work arrive at some
consistent findings, for example, that the honest mining is
not the stable equilibrium (§ IV-F) and the amount of loss to
pools(§ IV-E). However, our work studies the problem from
a different perspective and considers several other scenarios,
for example, the general case of attacking multiple pools and
when there are multiple dishonest miners in the victim pool.
Our work further explains the temporal conditions under which
the attacks are possibly profitable, conduct experimental tests
and discuss potential defenses. The work in [17] additionally
explains the Nash equilibrium for two pools and multiple pools
of symmetric power, which are interesting special cases of the
general game.
Other Bitcoin attacks. A number of previous works study
non-withholding attacks. Our CPS game model generalizes
previous studies and can be useful to systematize the study of
these attacks in the future. In particular, in [12] Rosenfeld et
al. discusses (i) “pool hopping” in which miners hop across
different pools utilizing a weakness of an old payoff scheme,
and (ii) “Lie in wait” attacks where the miner strategically
calculates the time to submit the found block. Another line
of work studies attacks that subvert the basic guarantees of
the Bitcoin consensus protocol, such as preventing doublespending. Eyal et al. introduced “Selfish mining”, where a
pool with more than 1/4th of the total computational power
can subvert the Bitcoin consensus protocol [29], improving
over the well-understood 51%-attack [42, 43]. Johnson et al.
distributed denial-of-service (DDoS) attacks between pools,
taking a take a game-theoretic approach to understand the
economics of DDoS attack [44]. This game-theoretic model
is different from our CPS game, since ours is appropriate for
studying the incentive structure for individual miners.
VIII. C ONCLUSION
In this paper, we introduce a new game called computational
power splitting game, which is useful for studying the security
of payoff schemes in competitive distributed computation
tasks. As a case study, we analyze the susceptibility of existing
Bitcoin mining pool protocols. We find that these protocols are
insecure against block withholding. Our CPS game model generalizes such reasoning in many other cryptocurrency attacks
and is a step towards systematizing the study of such attacks.
IX. ACKNOWLEDGEMENTS
We thank Jason Teutsch, Meni Rosenfeld, Luke Dashjr,
Andrew Miller, Jason Hughes, Gregory Maxwell, Ittay Eyal,
Alex Cook, and the anonymous reviewers of an earlier draft of
this paper for their helpful feedback. This work is supported by
the Ministry of Education, Singapore under R-252-000-560112, Yale-NUS College R-607-265-045-121 and a research
grant from Symantec. All opinions expressed in this work are
solely those of the authors.
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A PPENDIX
A. Proof of Analysis
Lemma A.1. If Bitcoin network is one accessible pool, the
attacker always gains extra reward, i.e., ∀ α, β ∈ (0, 1) :
∆R > 0 (Section IV-A).
Proof. We prove that ∀α ∈ (0, 1), ∀β ∈ (0, 1), we have:
R
αβ − αβ 2 + 1 − α
=
>1
(6)
R0
(1 − αβ)(1 + αβ − α)
Since both α and β are in the range (0, 1), the denominator
and numerator of (6) are both positive. Thus,
(6) ⇔ αβ − αβ 2 + 1 − α > (1 − αβ)(1 + αβ − α)
⇔ αβ(1 − α)(1 − β) > 0
It always holds since 0 < α, β < 1.
Lemma A.2. If the Bitcoin network is one accessible pool,
the attacker gains maximum reward when he spends 50% of
his computational power attacking, i.e., for any α, ∆R gets
maximum value if β = 0.5 (Section IV-A).
Proof. We define
2
αβ − αβ + 1 − α
R
F(α, β) = ∆R = 0 − 1 =
−1
R
(1 − αβ)(1 + αβ − α)
αβ(1 − α)(1 − β)
=
(1 − αβ)(1 + αβ − α)
as a function representing the fraction of reward that the
attacker gains by performing the BWH attack. We aim to show
∀0 < β, α < 1 that
F(α, β) ≤ F(α, 0.5)
⇔ F(α, β) − F(α, 0.5) ≤ 0
αβ(1 − α)(1 − β)
α(1 − α)
⇔
≤
(1 − αβ)(1 + αβ − α)
(2 − α)2
β(1 − β)
1
(since 0 < α, β < 1)
⇔
≤
1 + αβ − α
(2 − α)2
⇔ (4 − 4α + α2 )(β − β 2 ) ≤ (1 − αβ)(1 + αβ − α)
⇔ (2β − 1)2 ≥ 0
Lemma A.3. Given β~ = (β0 , β1 , ...βn ) where the attacker
spends αβk > 0 power to mine on pool Pk , the extra reward
∆R1 when the attacker attacks the pool Pk (γk = 1) is always
greater than ∆R0 when he honestly mines on Pk (γk = 0)
(Section IV-C).
Proof. From (3), we have
X
1 − αβi
P
∆R0 =
× ∆i
1 − α γi =1 βi
1≤i,γi =1
P
1 − α γi =1,i6=k βi
P
1 − α γi =1,i6=k βi − αβk
1 − αβk
P
+
× ∆k
1 − α γi =1 βi
It is easy to see that ∆R0 < ∆R1 .
∆R1 = ∆R0 ×
Lemma A.4. For any given network state, there exists a
strategy for the attacker to make his attack profitable (Section IV-F).
Proof. Without loss of generality, we show that, given a fixed
network state (α1 , α2 , c2 ), there exists c1 that maximizes R1
and makes a loss on R2.
1
(α1 − c1 )2
c1 (α2 − c2 )
R1 =
+
1 − c1 − c2 α1 − c1 + c2
α2 − c2 + c1 2
1
(α2 − c2 )
c2 (α1 − c1 )
R2 =
+
1 − c1 − c2 α2 − c2 + c1
α1 − c1 + c2
If both the miners are honest, i.e., c1 = c2 = 0, we have
R1 = α1 , R2 = α2 . Thus, if any of the miners carry out
the BWH attack by selecting his best value ci on the other
pool, his reward would increase while the other’s decreases.
For example, if P2 properly attacks P1 , we will have R2 > α2
α1
1
and R1 < α1 , thus R
R2 < α 2 .
We show that, given any fixed value of (α1 , α2 , c2 ) that P2
optimally picks, there exits c1 that makes
2
Thus
(α1 −c1 )
2 −c2 )
+ cα12(α
R1
−c2 +c1
= α(α1 −c−c1 +c)22
c2 (α1 −c1 )
2
2
R2
α2 −c2 +c1 + α1 −c1 +c2
−c1 )
c1
+ αc12−c
α1 + c1α(α2 1−c
2
1
=
−c2 )
c1 c2
+
α2 + c2α(α1 2−c
α2 −c2
1
R1
R2
>
α1
α2 .
We have
c1 (α1 − c1 )
c1 c2
+
α2 >
α2 − c2
α1 − c1
c2 (α2 − c2 )
c1 c2
+
α1
α1 − c1
α2 − c2
⇔ (α1 α2 − c1 α2 − α1 c2 )(c21 − c1 α1 + c22 − c2 α2 ) < 0
It is trivial to see that there exists c1 < α1 to satisty the above
inequation.
R1
α1
>
⇔
R2
α2
Lemma A.5. A player of computational power α uses c
as the contamination factor to attack will only gain higher
c
rate of reward if the condition ∆αR > 1−c
is satisfied
(Condition V-B.1).
Proof. Denote Th and T are the original time to find a block,
the time when the attack happens respectively. We have ∆T =
T − Th . When the miner uses an amount c of computational
power to attack, only 1 − c fraction of the network power
really finds blocks. Thus, the time to find a block increased to
c
T = Th /(1 − c), giving us ∆T = Th 1−c
. The attacker gains
better rate of reward when
R
Rh
c
>
⇔ (α + ∆R )Th > αTh
T
Th
1−c
c
⇔ ∆R > α
1−c
∆R
c
⇔
>
α
1−c
B. Proof for non-technical defense
Lemma B.1. In the non-technical solution that pays x fraction
of the block reward to the valid-block share, x = α is the
smallest fraction to dissuade an attacker (Section VI-B).
Proof. The attacker’s reward from the pool R1 , from honest
mining R0 , and his total reward R are computed as:
αβ
p0
R1 =
× 0
× (1 − x)
1 − αβ
p + αβ
α(1 − β)
R0 =
1 − αβ
−α2 β 2 + α(p0 + αβ)
αβp0
R=
−
x
0
(p + αβ)(1 − αβ)
1 − αβ
The relative extra reward that he gets is
R
αβ(p0 + αβ − β)
βp0
∆R =
−1 = 0
− 0
x.
Rh
(p + αβ)(1 − αβ) (p + αβ)(1 − αβ)
To dis-incentivize the attack, we must choose x such that
α(αβ − β)
(7)
∆R < 0 ⇔ x > α +
p0
0
p
From Section IV-B, we have 0 ≤ β ≤ 1−α
, which makes
α(αβ−β)
0 ≤ α+
≤
α.
Thus,
x
=
α
will
ensure
that the
p0
attacker of mining power up to α will not be incentived to
perform the attack.
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