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Short Paper: An Empirical Analysis of Blockchain Forks in Bitcoin

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Abstract

Temporary blockchain forks are part of the regular consensus process in permissionless blockchains such as Bitcoin. As forks can be caused by numerous factors such as latency and miner behavior, their analysis provides insights into these factors, which are otherwise unknown. In this paper we provide an empirical analysis of the announcement and propagation of blocks that led to forks of the Bitcoin blockchain. By analyzing the time differences in the publication of competing blocks, we show that the block propagation delay between miners can be of similar order as the block propagation delay of the average Bitcoin peer. Furthermore, we show that the probability of a block to become part of the main chain increases roughly linearly in the time the block has been published before the competing block. Additionally, we show that the observed frequency of short block intervals between two consecutive blocks mined by the same miner after a fork is conspicuously large. While selfish mining can be a cause for this observation, other causes are also possible. Finally, we show that not only the time difference of the publication of competing blocks but also their propagation speeds vary greatly.

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The Bitcoin cryptocurrency records its transactions in a public log called the blockchain. Its security rests critically on the distributed protocol that maintains the blockchain, run by participants called miners. Conventional wisdom asserts that the mining protocol is incentive-compatible and secure against colluding minority groups, that is, it incentivizes miners to follow the protocol as prescribed. We show that the Bitcoin mining protocol is not incentive-compatible. We present an attack with which colluding miners obtain a revenue larger than their fair share. This attack can have significant consequences for Bitcoin: Rational miners will prefer to join the selfish miners, and the colluding group will increase in size until it becomes a majority. At this point, the Bitcoin system ceases to be a decentralized currency. Unless certain assumptions are made, selfish mining may be feasible for any group size of colluding miners. We propose a practical modification to the Bitcoin protocol that protects Bitcoin in the general case. It prohibits selfish mining by pools that command less than \(1/4\) of the resources. This threshold is lower than the wrongly assumed \(1/2\) bound, but better than the current reality where a group of any size can compromise the system.
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Blockchain-based cryptocurrencies have demonstrated how to securely implement traditionally centralized systems, such as currencies, in a decentralized fashion. However, there have been few measurement studies on the level of decentralization they achieve in practice. We present a measurement study on various decentralization metrics of two of the leading cryptocurrencies with the largest market capitalization and user base, Bitcoin and Ethereum. We investigate the extent of decentralization by measuring the network resources of nodes and the interconnection among them, the protocol requirements affecting the operation of nodes, and the robustness of the two systems against attacks. In particular, we adapted existing internet measurement techniques and used the Falcon Relay Network as a novel measurement tool to obtain our data. We discovered that neither Bitcoin nor Ethereum has strictly better properties than the other. We also provide concrete suggestions for improving both systems.
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A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.
Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction
  • A Narayanan
  • J Bonneau
  • E Felten
  • A Miller
  • S Goldfeder