DAG-Oriented Protocols PHANTOM and GHOSTDAG under Incentive Attack via Transaction Selection Strategy

TL;DR

This paper analyzes DAG-based blockchain protocols PHANTOM and GHOSTDAG, revealing that malicious deviations in transaction selection can increase miner profits and reduce throughput, impacting decentralization and protocol robustness.

Contribution

It introduces a custom simulator to study corner cases and incentives, demonstrating vulnerabilities and strategic behaviors in DAG-oriented blockchain protocols.

Findings

Malicious actors profit more by deviating from the protocol.

Deviations reduce network throughput due to transaction duplication.

Miners tend to form pools, harming decentralization.

Abstract

In response to the bottleneck of processing throughput inherent to single chain PoW blockchains, several proposals have substituted a single chain for Directed Acyclic Graphs (DAGs). In this work, we investigate two notable DAG-oriented designs. We focus on PHANTOM (and its optimization GHOSTDAG), which proposes a custom transaction selection strategy that enables to increase the throughput of the network. However, the related work lacks a thorough investigation of corner cases that deviate from the protocol in terms of transaction selection strategy. Therefore, we build a custom simulator that extends open source simulation tools to support multiple chains and enables us to investigate such corner cases. Our experiments show that malicious actors who diverge from the proposed transaction selection strategy make more profit as compared to honest miners. Moreover, they have a detrimental effect on the processing throughput of the PHANTOM (and GHOSTDAG) due to same transactions being included in more than one block of different chains. Finally, we show that multiple miners not following the transaction selection strategy are incentivized to create a shared mining pool instead of mining independently, which has a negative impact on decentralization.