Many of today's crypto currencies use blockchains as decentralized ledgers and secure them with proof of work. In case of a fork of the chain, Bitcoin's rule for achieving consensus is selecting the longest chain and discarding the other chain as stale. It has been demonstrated that this consensus rule has a weakness against selfish mining in which the selfish miner exploits the variance in block generation by partially withholding blocks. In Ethereum, however, under certain conditions stale blocks don't have to be discarded but can be referenced from the main chain as uncle blocks yielding a partial reward. This concept limits the impact of network delays on the expected revenue for miners. But the concept also reduces the risk for a selfish miner to gain no rewards from withholding a freshly minted block. This paper uses a Monte Carlo simulation to quantify the effect of uncle blocks both to the profitability of selfish mining and the blockchain's security in Ethereum (ETH). A brief outlook about a recent Ethereum Classic (ETC) improvement proposal that weighs uncle blocks during the selection of the main chain will be given.
@cite_13 perform a game theoretic analysis of the security of Bitcoin mining pool protocols against block withholding. It focuses on mining profitability but does not quantify the effects on the blockchain's security. The attack is orthogonal to the selfish mining attack of the present paper.
@cite_13
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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 crypto currency 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. The rise of centralized mining pools for risk sharing does not necessarily undermine the decentralization required for public blockchains. However, mining pools as a financial innovation significantly escalates the arms race among competing miners and thus increases the energy consumption of proof-of-work-based blockchains. Each individual miner's cross-pool diversification and endogenous fees charged by pools generally sustain decentralization --- larger pools better internalize their externality on global hash rates, charge higher fees, attract disproportionately fewer miners, and thus grow slower. Empirical evidence from Bitcoin mining supports our model predictions, and the economic insights apply to many other blockchain protocols, as well as mainstream industries with similar characteristics. Bitcoin was recently introduced as a peer-to-peer electronic currency in order to facilitate transactions outside the traditional financial system. The core of Bitcoin, the Blockchain, is the history of the transactions in the system maintained by all miners as a distributed shared register. New blocks in the Blockchain contain the last transactions in the system and are added by miners after a block mining process that consists in solving a resource consuming proof-of-work (cryptographic puzzle). The reward is a motivation for mining process but also could be an incentive for attacks such as selfish mining. In this paper we propose a solution for one of the major problems in Bitcoin : selfish mining or block-withholding attack. This attack is conducted by adversarial or selfish miners in order to either earn undue rewards or waste the computational power of honest miners. Contrary to recent solutions, our solution, ZeroBlock, prevents block-withholding using a technique free of timestamp that can be forged. Moreover, we show that our solution is compliant with nodes churn. The Bitcoin protocol requires nodes to quickly distribute newly created blocks. Strong nodes can, however, gain higher payoffs by withholding blocks they create and selectively postponing their publication. The existence of such selfish mining attacks was first reported by Eyal and Sirer, who have demonstrated a specific deviation from the standard protocol (a strategy that we name SM1).