What is Selfish Mining?

Selfish mining is a method of mining crypto assets in which a group of miners (or a single user) collaborate to maximize their revenue and gain control over a blockchain. The process involves hiding newly created blocks from the public blockchain and revealing them at a specific time to gain an advantage over other miners. This strategy is facilitated by the way Proof-of-Work (PoW) blockchains validate transactions using nodes, or miners, that solve complex cryptographic puzzles.

Individual miners often join mining pools to aggregate their computing power and share rewards, as the high energy consumption and costs of PoW blockchains make it difficult for solo miners to compete. Mining rewards are distributed based on the contribution of each node in the pool.

In some cases, two blocks may be created simultaneously, which could cause the blockchain to fork into two separate chains. Selfish miners exploit this vulnerability by withholding the broadcast of their mined block to other nodes. Consequently, honest nodes continue to add new blocks to the chain, unaware of the withheld block. Meanwhile, the selfish miners continue mining on their private chain, which grows longer.

Once the selfish miners have gained a sufficient advantage, they release their withheld block to the public blockchain. This causes the blockchain to recognize the selfish miners’ chain as the valid one, invalidating the work of the honest nodes and awarding mining rewards to the selfish miners. This encourages other miners to join the selfish mining pool, increasing its size and potentially its control over the blockchain.

If the selfish mining pool accumulates a majority of the network’s hash rate (51% or more), it can manipulate the processing of transactions and undermine the decentralized nature of the blockchain. However, this outcome is unlikely, as miners are aware that any fraudulent activity detected could lead to a significant drop in the cryptocurrency’s price. As a result, most miners prefer to operate honestly rather than join high-reward, potentially fraudulent mining pools.

What is Selfish Mining Known For?

Selfish mining is a contentious strategy known for its potential to undermine the stability and fairness of cryptocurrency mining operations. By exploiting the inherent rules of a blockchain network, miners employing this approach can maximize their profits at the expense of others. Selfish mining involves:

• Withholding discovered blocks
• Compelling other miners to squander resources on abandoned chains
• Concentrating hash power within a single entity or pool

This consolidation heightens the risk of a 51% attack, which could result in censorship and double spending within the network. While major networks like Bitcoin have not yet been significantly affected by selfish mining, its ongoing threat to the decentralized nature of cryptocurrencies raises valid concerns about their long-term security and stability.

source: https://digitalcommons.odu.edu/cgi/viewcontent.cgi?article=1314&context=ece_fac_pubs

State-Transition Diagram in Selfish Mining

The state-transition diagram is a crucial tool for understanding the behavior of the Bitcoin network under a selfish mining attack. The diagram, as illustrated in Figure 2, differentiates six major states: 0 (original or initial state), 0’ (double branches), 1 (one-block lead), 2 (two-block lead), 3 (three-block lead), and 4 (attack success).

In the initial state (0), all miners mine on a single main chain without any branches. When the malicious miner discovers a block and keeps it secret, the system transitions from state 0 to state 1, with a transition rate of λ01. If an honest miner finds the block first, the system remains in state 0, with a rate of µ00.

In state 1, if the malicious miner successfully mines the next block on their private branch, the system transitions to state 2, with a rate of λ12. If an honest miner finds the next block before the malicious miner, the system transitions to state 0’, with a rate of µ10’.

In state 0’ (where the chain has two branches of equal length), the system transitions to state 1 when the selfish miner finds the new block first, with a rate of λ0’1. If the honest miner discovers the new block first, the system transitions back to the initial state 0, with a rate of µ0’0.

In state 2, the malicious miner can find the next block first, with a rate of λ23, causing the system to transition to state 3. If the honest miner discovers the next block, the system transitions back to state 1, with a rate of µ21.

In state 3, when the honest miner successfully mines the next block with a rate of λ34, the system transitions to state 4. In state 4, the selfish miner broadcasts their private branch, which becomes the main branch, thus completing the selfish mining attack.

The state-transition diagram, based on the continuous-time Markov chain (CTMC) approach, aids in deriving state probabilities and analyzing the Bitcoin network’s dependability. This understanding allows researchers to investigate the effects of various state transition rates on the network’s overall stability and security.

source: https://digitalcommons.odu.edu/cgi/viewcontent.cgi?article=1314&context=ece_fac_pubs

Indicators of Selfish Activity

Detecting selfish mining activity can be challenging, as it involves identifying subtle changes in the network. Two primary network signatures can help reveal selfish mining:

• Abandoned (orphaned) blocks: A surge in orphaned blocks could signal the presence of selfish mining. Selfish miners aim to outperform the honest pool’s work, which results in a series of discarded blocks. By monitoring the rate of abandoned blocks over time, one can detect if selfish mining is on the rise. However, this approach faces limitations as abandoned blocks are pruned in the Bitcoin network, making an accurate count difficult.
• Timing of successive blocks: The interval between two blocks can provide hints about selfish mining. Blocks in close succession are relatively rare in honest protocols but are more common when a selfish miner quickly releases withheld blocks to outpace honest miners. Analyzing the timestamps on successive blocks can help identify deviations from expected intervals, suggesting the presence of selfish mining. However, this method is statistical and may take time to detect any irregularities.

Countermeasures

As awareness about selfish mining increases, any miner attempting this strategy would likely do so covertly to avoid backlash. To stay ahead of potential attackers, consider the following countermeasures:

• Block ownership camouflage: Selfish miners may use different Bitcoin and IP addresses, tumble their payouts, and pretend to be multiple competing pools. Identifying collusion becomes difficult when block ownership is concealed, which is why relying on block ownership as an indicator is not ideal.
• Focusing on block timing: Block timing analysis detects only a subset of selfish miner behaviors. A selfish miner might avoid specific behaviors to remain undetected, sacrificing some profit in the process.
• Examining abandoned blocks: The Bitcoin network’s current practice of pruning and discarding abandoned blocks aids selfish miners by destroying evidence of their activities. Modifying the protocol to propagate all solved blocks would help mitigate this issue and make it easier to detect selfish mining.

Although detecting selfish mining is possible, it remains a difficult task. Currently, there is no definitive evidence to suggest selfish mining is taking place within the Bitcoin network. Nevertheless, continued vigilance and the development of sophisticated detection techniques are essential to maintain the network’s security and stability.

History of Selfish Mining

The concept of selfish mining was first theorized as early as 2010 and gained significant attention in 2013 when researchers Ittay Eyal and Emin Gün Sirer published their paper, “Majority is not Enough: Bitcoin Mining is Vulnerable.” The Cornell researchers highlighted the potential for an economic attack by miners with a minority hash rate that could result in a disproportionate share of block rewards and transaction fees. Their paper emphasized that selfish mining could become more efficient than honest mining when a miner or mining pool controls more than 25% of a network’s hashrate under certain conditions. This revelation sparked concerns about the potential long-term effects of selfish mining on cryptocurrency networks.

Use Case and Features of Selfish Mining

Selfish mining is an exploitative strategy employed by certain miners or mining pools to maximize their profits by manipulating the blockchain protocol rules. This tactic undermines the decentralized nature of cryptocurrency networks and can have adverse effects on their overall security and stability. The key features of selfish mining include the following:

Withholding blocks

Selfish miners intentionally keep newly discovered blocks private instead of broadcasting them to the entire network. By doing so, they create a hidden chain of blocks that they can eventually release to the public blockchain when it’s advantageous for them. \

Forced waste of resources

As honest miners continue to work on the public blockchain, they remain unaware of the private chain created by selfish miners. When the selfish miners reveal their longer private chain, the honest miners’ work on the discarded blocks becomes wasted, leading to a significant loss of resources, such as electricity and computational power.

Potential for collusion

The selfish mining strategy can entice other miners to join the selfish mining pool in pursuit of higher rewards. As more miners join, the pool’s hash power increases, potentially reaching a point where they control over 51% of the network’s hash rate. This increased hash power can lead to a 51% attack, undermining the integrity of the blockchain and allowing the attackers to perform double-spending or selectively approve transactions. \

Network vulnerabilities

Selfish mining exposes vulnerabilities in the consensus mechanisms of Proof-of-Work (PoW) blockchains. By exploiting these weaknesses, selfish miners can disrupt the equitable distribution of mining rewards and erode the trust of users in the cryptocurrency network. \

Economic implications

This selfish mining strategy can have far-reaching economic consequences. For instance, it can lead to an imbalance in the distribution of mining rewards and transaction fees, discouraging new miners from joining the network and potentially centralizing mining power. Moreover, selfish mining can negatively impact the value of the associated cryptocurrency, as the market may lose confidence in the network’s security and stability.

Is Selfish Mining a Good Investment?

While selfish mining may seem like an attractive strategy for miners looking to maximize their profits, it’s essential to consider the risks and long-term implications associated with this approach. Here are some factors to keep in mind when evaluating whether selfish mining is a good investment:

• Tied-up capital: Miners with a significant share of the hashrate often have a considerable amount of capital invested in their mining operations. This includes the cost of purchasing and maintaining mining equipment, which represents the largest share of capital expenditures. Engaging in selfish mining could jeopardize this investment if the blockchain’s credibility is undermined.
• Impact on cryptocurrency value: Selfish mining can significantly influence the price of the associated cryptocurrency. By undermining the credibility of the blockchain, selfish miners risk devaluing their source of income, as the market may lose confidence in the network’s security and stability.
• Risk of collusion: In order to mount a successful selfish mining attack, miners may need to involve other miners or pools, which comes with significant risks. The process of forming a coalition can be complicated, and there is always a chance that the scheme is exposed, leading to potential legal consequences or damage to the participants’ reputations.
• Short block withholding: Some mining pools may utilize short block withholding periods, particularly when blocks are found quickly relative to the targeted block production rate. While this can provide a slight advantage by increasing the chances of finding two consecutive blocks in a row, it also raises the risk of detection and the potential negative consequences associated with selfish mining.
• Alternative mining strategies: There are more complex and intricate mining strategies, such as Stubborn Mining, which combines selfish mining with an Eclipse Attack. These advanced strategies may offer increased potential for profit but also come with heightened risks and potential negative repercussions for the network and the miners involved.

In conclusion, while selfish mining might offer potential short-term gains, the long-term risks and negative implications for the blockchain ecosystem make it a questionable investment strategy. It is essential for miners to carefully weigh the potential benefits against the risks and consider the impact of their actions on the broader cryptocurrency community. Engaging in honest mining practices not only preserves the integrity of the blockchain but also helps ensure the long-term sustainability and growth of the cryptocurrency market.

Understanding and Mitigating Selfish Mining Risks

The Bitcoin network is susceptible to selfish mining attacks, in which malicious miners withhold discovered blocks and mine on their private chains. Existing research primarily focuses on cryptography, protocol design, risk detection, and damage estimation. However, analyzing selfish mining from a dependability perspective is crucial for effective defense against such attacks.

This article contributes to the existing body of knowledge by developing an analytical dependability model based on the CTMC to assess the Bitcoin network’s vulnerability to selfish mining attacks. The analysis reveals several key findings:

• The Bitcoin network’s dependability decreases when the selfish attacker has more computing power.
• The system tends to fail more quickly as the attack-triggering rate increases.
• The network’s dependability improves when honest miners have better recovery capabilities.

Although these findings may seem intuitive, the quantitative results and comparisons provide valuable insights for developing resilient algorithms and protocols to enhance the robustness of current blockchain-based cryptocurrency network models. These improvements can bolster the network’s self-defense capabilities against various malicious attacks.

Future research could explore extending dependability analysis to non-exponential state transition times by employing methods such as semi-Markov models and multi-integral-based analytical approaches. These advancements will help further strengthen the security and dependability of blockchain networks in the face of evolving threats.

Conclusion

In summary, selfish mining is a controversial and potentially harmful practice that can undermine the core principles of decentralization, security, and fairness in cryptocurrency networks. By taking advantage of protocol rules, selfish miners can manipulate the system for personal gain, often at the expense of honest miners and the overall health of the blockchain.