On the profitability of selfish blockchain mining under consideration of ruin
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Publication:5031007
Abstract: Mining blocks on a blockchain equipped with a proof of work consensus protocol is well-known to be resource-consuming. A miner bears the operational cost, mainly electricity consumption and IT gear, of mining, and is compensated by a capital gain when a block is discovered. This paper aims at quantifying the profitability of mining when the possible event of ruin is also considered. This is done by formulating a tractable stochastic model and using tools from applied probability and analysis, including the explicit solution of a certain type of advanced functional differential equation. The expected profit at a future time point is determined for the situation when the miner follows the protocol as well as when he/she withholds blocks. The obtained explicit expressions allow to analyze the sensitivity with respect to the different model ingredients and to identify conditions under which selfish mining is a strategic advantage.
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Cites work
- An Introduction to Delay Differential Equations with Applications to the Life Sciences
- Boundary crossing of order statistics point processes
- Erlangian Approximations for Finite-Horizon Ruin Probabilities
- Fraud risk assessment within blockchain transactions
- Modeling and analysis of block arrival times in the Bitcoin blockchain
- On the Lambert \(w\) function
- Optimal dividends in the dual model
- Risk models in insurance and epidemics: a bridge through randomized polynomials
Cited in
(9)- Publish or Perish: A Backward-Compatible Defense Against Selfish Mining in Bitcoin
- Uncle-block attack: blockchain mining threat beyond block withholding for rational and uncooperative miners
- Sluggish Mining: Profiting from the Verifier’s Dilemma
- On the randomized Schmitter problem
- Blockchain mining in pools: analyzing the trade-off between profitability and ruin
- Oceanic Games: Centralization Risks and Incentives in Blockchain Mining
- Selfish mining strategy elaboration
- Optimal dynamic mining policy of blockchain selfish mining through sensitivity-based optimization
- Sensitivity-based optimization for blockchain selfish mining
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