Majority is not enough: bitcoin mining is vulnerable

Reviewer: Barrett Hazeltine

This article concerns a way to circumvent the decentralization aspect of Bitcoin, that is, it shows how a group of "miners" could control the cryptocurrency by colluding. The attractiveness of Bitcoin is the perception that no person can be in control. In fact, no evidence exists that up to now a group of miners has colluded. This article gives a strategy for reducing the possibility of control. Bitcoin "records its transactions in a public log called the blockchain." Participants, called miners, enter transactions using a distributive protocol. These miners bring different amounts of resources. As the authors state, "conventional wisdom asserts that the mining protocol ... incentivizes miners to follow the protocol as prescribed" by ensuring that miners would not profit by doing otherwise. Conventional wisdom is incorrect. The article shows that rational miners, by colluding, will profit from a higher share of profits than noncolluding miners; "the colluding group will increase in size until it becomes a [controlling] majority." When such happens, "the Bitcoin system ceases to be a decentralized currency." The article proposes a practical modification to the protocol. The modification prevents "selfish mining by a coalition that commands less than one-fourth of the [total] resources"; this limit is "better than the current reality where a coalition of any size can compromise the system." This article is of most interest to designers of cryptocurrency systems, but is readable and thus of value to anyone wanting to know what is under the hood.