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Decentralized Exchange that Mitigate a Bribery Attack

Nitin Awathare

TL;DR

The paper investigates HTLC-based exchanges and exposes vulnerabilities to bribery, including miner collusion, where prior defenses (MAD-HTLC and He-HTLC) fall short. It introduces two novel attack vectors, B3A and M2MBA, and then proposes DEMBA, a two-phase HTLC protocol that eliminates miners’ token-confiscation power and aligns incentives so deviations are unattractive. Through game-theoretic analysis and cross-chain implementations on Bitcoin and Ethereum, the authors show that DEMBA resists all bribery scenarios while achieving competitive costs and latency. The work closely links incentive design, cryptographic commitments, and practical deployment considerations to improve secure, decentralized token exchanges. This has significant implications for the reliability of cross-party exchange protocols in permissionless blockchains and MEV-sensitive environments.

Abstract

Despite the popularity of Hashed Time-Locked Contracts (HTLCs) because of their use in wide areas of applications such as payment channels, atomic swaps, etc, their use in exchange is still questionable. This is because of its incentive incompatibility and susceptibility to bribery attacks. State-of-the-art solutions such as MAD-HTLC (Oakland'21) and He-HTLC (NDSS'23) address this by leveraging miners' profit-driven behaviour to mitigate such attacks. The former is the mitigation against passive miners; however, the latter works against both active and passive miners. However, they consider only two bribing scenarios where either of the parties involved in the transfer collude with the miner. In this paper, we expose vulnerabilities in state-of-the-art solutions by presenting a miner-collusion bribery attack with implementation and game-theoretic analysis. Additionally, we propose a stronger attack on MAD-HTLC than He-HTLC, allowing the attacker to earn profits equivalent to attacking naive HTLC. Leveraging our insights, we propose \prot, a game-theoretically secure HTLC protocol resistant to all bribery scenarios. \prot\ employs a two-phase approach, preventing unauthorized token confiscation by third parties, such as miners. In Phase 1, parties commit to the transfer; in Phase 2, the transfer is executed without manipulation. We demonstrate \prot's efficiency in transaction cost and latency via implementations on Bitcoin and Ethereum.

Decentralized Exchange that Mitigate a Bribery Attack

TL;DR

The paper investigates HTLC-based exchanges and exposes vulnerabilities to bribery, including miner collusion, where prior defenses (MAD-HTLC and He-HTLC) fall short. It introduces two novel attack vectors, B3A and M2MBA, and then proposes DEMBA, a two-phase HTLC protocol that eliminates miners’ token-confiscation power and aligns incentives so deviations are unattractive. Through game-theoretic analysis and cross-chain implementations on Bitcoin and Ethereum, the authors show that DEMBA resists all bribery scenarios while achieving competitive costs and latency. The work closely links incentive design, cryptographic commitments, and practical deployment considerations to improve secure, decentralized token exchanges. This has significant implications for the reliability of cross-party exchange protocols in permissionless blockchains and MEV-sensitive environments.

Abstract

Despite the popularity of Hashed Time-Locked Contracts (HTLCs) because of their use in wide areas of applications such as payment channels, atomic swaps, etc, their use in exchange is still questionable. This is because of its incentive incompatibility and susceptibility to bribery attacks. State-of-the-art solutions such as MAD-HTLC (Oakland'21) and He-HTLC (NDSS'23) address this by leveraging miners' profit-driven behaviour to mitigate such attacks. The former is the mitigation against passive miners; however, the latter works against both active and passive miners. However, they consider only two bribing scenarios where either of the parties involved in the transfer collude with the miner. In this paper, we expose vulnerabilities in state-of-the-art solutions by presenting a miner-collusion bribery attack with implementation and game-theoretic analysis. Additionally, we propose a stronger attack on MAD-HTLC than He-HTLC, allowing the attacker to earn profits equivalent to attacking naive HTLC. Leveraging our insights, we propose \prot, a game-theoretically secure HTLC protocol resistant to all bribery scenarios. \prot\ employs a two-phase approach, preventing unauthorized token confiscation by third parties, such as miners. In Phase 1, parties commit to the transfer; in Phase 2, the transfer is executed without manipulation. We demonstrate \prot's efficiency in transaction cost and latency via implementations on Bitcoin and Ethereum.
Paper Structure (27 sections, 10 theorems, 10 equations, 10 figures, 2 algorithms)

This paper contains 27 sections, 10 theorems, 10 equations, 10 figures, 2 algorithms.

Table of Contents

  1. Introduction
  2. Background
  3. Naive HTLC and Bribery attack on it
  4. Existing work overcoming the bribery attack on naive HTLC (MAD-HTLC and He-HTLC)
  5. Motivation (Attacks on the existing work)
  6. Bribery based Block Broadcasting Attack (B3A)
  7. Miner to Miner Bribery Attack (M2MBA)
  8. DEMBA Overview
  9. M2MBA analysis
  10. System Model
  11. M2MBA on He-HTLC
  12. M2MBA Details:
  13. Game Details
  14. Analysis
  15. DEMBA Analysis
  16. ...and 12 more sections

Key Result

Lemma 1

In $\zeta^{mba}(k, red)$, where $k \leq T$, if $(T-t_{pub})*br*\lambda_i/\lambda_{col}>f^{dep}_A$, then it is a dominant move for active miners to accept the bribe by censoring the transaction $tx^{dep}_A$ instead of including it in the block.

Figures (10)

  • Figure 1: Bobs' attempt to make an bribery attack on the naive HTLC. Bob deploy contract committing a bribe $br$ to the miners for censoring $tx^{dep}_A$, which is ultimately send to miners at time $t > T$
  • Figure 2: (a)Honest execution of MAD-HTLC, (b)Bob perform the bribery attack mentioned above on the MAD-HTLC, (c)Utility gained by each party during the honest and malicious execution of MAD-HTLC
  • Figure 3: (a) Honest execution of He-HTLC when Alice release the $pre_A$ before time $T$, (b) Honest execution of He-HTLC when Bob release the $pre_B$ post time $T$, and (c) Miner to miner bribery attack (M2MBA) on He-HTLC.
  • Figure 4: Utility gain by each involved party during honest execution of He-HTLC and during M2MBA attack.
  • Figure 5: Bitcoin implementation (locking script) for DEMBA contracts
  • ...and 5 more figures

Theorems & Definitions (20)

  • Lemma 1
  • Lemma 2
  • Lemma 3
  • Lemma 4
  • Lemma 5
  • Theorem 1
  • proof
  • Lemma 6
  • Lemma 7
  • Lemma 8
  • ...and 10 more