Incentive Attacks in BTC: Short-Term Revenue Changes and Long-Term Efficiencies
Mustafa Doger, Sennur Ulukus
TL;DR
This paper analyzes incentive attacks in Bitcoin-like systems with a Bitcoin-style Difficulty Adjustment Algorithm (DAA), introducing a short-term revenue-change framework and a novel long-term mining-efficiency metric to compare adversaries and honest miners across selfish mining, intermittent variants, coin hopping, and block withholding. It establishes rigorous, L-based characterizations of attack cycles and derives epoch timings, revenue changes, and profit lags for multiple strategies, including a unified long-run efficiency measure that accounts for revenue, time, and energy costs. The work shows that some short-term intermittent strategies offer negligible gains relative to standard selfish mining, while long-run efficiency often favors selfish mining over intermittent variants; coin hopping can transfer value to the attacker and loyal miners in the short term, potentially destabilizing weaker coins. For block withholding, PAW attacks can yield near-zero profit lag for small pools, challenging prior beliefs about the necessity of DAA for resilience. Overall, the paper provides a cohesive framework to compare diverse deviant-mining strategies on both short- and long-term horizons and highlights conditions under which rival strategies dominate, with implications for protocol design and cross-coin dynamics.
Abstract
Bitcoin's (BTC) Difficulty Adjustment Algorithm (DAA) has been a source of vulnerability for incentive attacks such as selfish mining, block withholding and coin hopping strategies. In this paper, first, we rigorously study the short-term revenue change per hashpower of the adversarial and honest miners for these incentive attacks. To study the long-term effects, we introduce a new efficiency metric defined as the revenue/cost per hashpower per time for the attacker and the honest miners. Our results indicate that the short-term benefits of intermittent mining strategies are negligible compared to the original selfish mining attack, and in the long-term, selfish mining provides better efficiency. We further demonstrate that a coin hopping strategy between BTC and Bitcoin Cash (BCH) relying on BTC DAA benefits the loyal honest miners of BTC in the same way and to the same extent per unit of computational power as it does the hopper in the short-term. For the long-term, we establish a new boundary between the selfish mining and coin hopping attack, identifying the optimal efficient strategy for each parameter. For block withholding strategies, it turns out, the honest miners outside the pool profit from the attack, usually even more than the attacker both in the short-term and the long-term. Moreover, a power adjusting withholding attacker does not necessarily observe a profit lag in the short-term. It has been long thought that the profit lag of selfish mining is among the main reasons why such an attack has not been observed in practice. We show that such a barrier does not apply to power adjusting attacks and relatively small pools are at an immediate threat.