On profitability of selfish mining

TL;DR

This paper analyzes the profitability of selfish mining in Bitcoin, revealing it is only profitable after difficulty adjustments and proposing protocol improvements to prevent such attacks.

Contribution

It introduces a rigorous profitability model using martingale techniques, highlighting the timing aspect of selfish mining and proposing protocol modifications for immunity.

Findings

Selfish mining is only profitable after difficulty adjustments.

The expected attack cycle duration is computed using martingale methods.

Bitcoin protocol can be improved to be immune to selfish mining.

Abstract

We review the so called selfish mining strategy in the Bitcoin network and compare its profitability to honest mining.We build a rigorous profitability model for repetition games. The time analysis of the attack has been ignored in the previous literature based on a Markov model,but is critical. Using martingale's techniques and Doob Stopping Time Theorem we compute the expected duration of attack cycles. We discover a remarkable property of the bitcoin network: no strategy is more profitable than the honest strategy before a difficulty adjustment. So selfish mining can only become profitable afterwards, thus it is an attack on the difficulty adjustment algorithm. We propose an improvement of Bitcoin protocol making it immune to selfish mining attacks. We also study miner's attraction to selfish mining pools. We calculate the expected duration time before profit for the selfish miner, a computation that is out of reach by the previous Markov models.