Mining Pools Prof. Tom Austin San Jos State University Review: - - PowerPoint PPT Presentation

Cryptocurrencies & Security on the Blockchain

• Prof. Tom Austin

San José State University

Mining Pools

Review: Bitcoin mining

• Miners verify transactions

–Must find a proof-of-work. –Reward: newly generated bitcoins, plus transaction fees.

• One-CPU-one-vote
• Key to Bitcoin's decentralization

Bitcoin Mining Rig, 2009

Bitcoin Hash Rate Over Time

Bitcoin Mining Rig(s), today

Application-Specific Integrated Circuit (ASIC)

• Speed up mining
• Expensive
• Off-the-shelf hardware cannot compete

–On the other hand, neither can botnets

• Result: mining is less decentralized

Mining Pools

• Share rewards for steadier payout

–Less BTC now > more BTC later

• Operator collects fee for coordinating
• A variety of mining pool schemes exist
• Meni Rosenfeld, Analysis of Bitcoin

Pooled Mining Reward Systems, 2011.

Mining Pool "Shares"

• Coordinator determines blocks.
• Miners report "shares" to coordinator.

–"Near misses" –Easier target (about 1000x easier)

• So share of mining rewards are

determined by a PoW.

Pay-Per-Share (PPS)

• Operator immediately pays

for shares

• Operator absorbs cost of

paying shares

• Higher transaction fees

Proportional Reward (PROP)

• Finding shares earns future rewards
• Everyone gets paid when proof is

found

• Lower fees
• Vulnerable to pool hopping attack

Pool Hopping Attack

A miner can:

• Find a share early in the search for a new block.
• Continue to benefit from the mining work of
• ther miners in the pool.
• Switch to a new pool.

Rewards exceed the rewards of playing fairly.

Pool Hopping Example

(in-class)

Other attacks

• Sabotage (aka vigilante attack)

– Miner submits shares, but throws away proofs – Miner benefits when pool wins – Pool does not benefit from miner's hashing power

• Lie in wait attack. A miner in a pool:

– Finds a valid block, but withholds it – Searches for a bunch of additional shares – Announces block after gathering extra shares

Pay Per Last N Shares (PPLNS)

• Same as PROP, except …
• Rewards are only paid to the last

N shares

• Introduces time element
• Dis-incentivizes pool hopping
• Dominant approach today

Bitcoin Centralization

• ASICs reduce the number of miners
• Mining pools concentrate mining power in

hands of pool operators

– Worse yet, large pools pay out rewards more frequently

• RESULT: Bitcoin is becoming more

centralized

Why do we care?

Problems with Centralized Mining

• 51% attacks
• Double-spending
• Censorship

– Feather-forking

• Coercion

– Law enforcement could arrest pool operators

• Selfish-mining

Bitcoin is Broken

http://hackingdistributed.com/2013/11/04/bitcoin-is-broken/

Bitcoin is broken. And not just superficially so, but fundamentally, at the core protocol level.

• -Ittay Eyal and Emin Gün Sirer

Majority is Not Enough

• Eyal and Sirer, "Majority is not Enough: Bitcoin

Mining is Vulnerable", FC 2014.

• Conventional wisdom:

– BTC works if majority of miners follow the protocol. – Wrong

• Two-thirds must be honest

– And that is the best theoretical case.

• Practical solution suggested

– Requires three-quarters of miners are honest.

Selfish Mining Attack

• Selfish miners find a block

–They do not publish it

• They begin searching for the next block
• Other miners waste work building off of

an orphan block

• If another miner finds a proof, the selfish

miners share their own block

Selfish Mining Example

(in-class)

Propagation of Selfish-Mining Block

• Network seeded with colluding nodes
• When nodes receive a block:

–Share the selfishly mined block instead. –With enough Sybils, selfish miners will probably win

Propagation of Selfishly Mined Block

(in-class)

Defenses

• Randomly choose between blockchains of

equal weight

– Defeats propagation of selfishly mined block – Eyal and Sirer's defense

• P2Pool – Peer-to-peer mining pool

– A mini-blockchain replaces the pool operator

• Non-outsourceable puzzles

Non-outsourceable Puzzles

• Observation: pool members do not trust each
• ther.
• Solution: design proof so that the private key

for the reward is required.

• Mining proof is found before the coinbase

address is specified.

• For a good overview, see

https://www.youtube.com/watch?v=zqo64quO 7og

Are Non-outsourceable Puzzles a Good Idea?

• Would break up benign pools

–P2Pool

• Might force investors to invest in

larger server forms

–Increasing centralization further

Is selfish mining a real threat?

• Craig Wright, The cancer that is the Selfish

mining fallacy, Medium 2018.

• Yotam Gafni, “The selfish mining fallacy”

explained and debunked, Hackernoon 2018.

– Debunks Wright's objections to selfish mining.

• To date, no selfish mining attacks have been

spotted.

Eyal and Sirer Comment:

There are four stages of acceptance to new ideas:

• 1. This is worthless nonsense.
• 2. This is an interesting, but perverse, point of

view.

• 3. This is true, but quite unimportant.
• 4. I always said so.