No abstract
Cryptocurrencies like Bitcoin and the more recent Ethereum system allow users to specify scripts in transactions and contracts to support applications beyond simple cash transactions. In this work, we analyze the extent to which these systems can enforce the correct semantics of scripts. We show that when a script execution requires nontrivial computation effort, practical attacks exist which either waste miners' computational resources or lead miners to accept incorrect script results. These attacks drive miners to an illfated choice, which we call the verifier's dilemma, whereby rational miners are well-incentivized to accept unvalidated blockchains. We call the framework of computation through a scriptable cryptocurrency a consensus computer and develop a model that captures incentives for verifying computation in it. We propose a resolution to the verifier's dilemma which incentivizes correct execution of certain applications, including outsourced computation, where scripts require minimal time to verify. Finally we discuss two distinct, practical implementations of our consensus computer in real cryptocurrency networks like Ethereum.
Several new services incentivize clients to compete in solving large computation tasks in exchange for financial rewards. This model of competitive distributed computation enables every user connected to the Internet to participate in a game in which he splits his computational power among a set of competing pools -the game is called a computational power splitting game. We formally model this game and show its utility in analyzing the security of pool protocols that dictate how financial rewards are shared among the members of a pool.As a case study, we analyze the Bitcoin cryptocurrency which attracts computing power roughly equivalent to billions of desktop machines, over 70% of which is organized into public pools. We show that existing pool reward sharing protocols are insecure in our game-theoretic analysis under an attack strategy called the "block withholding attack". This attack is a topic of debate, initially thought to be ill-incentivized in today's pool protocols: i.e., causing a net loss to the attacker, and later argued to be always profitable. Our analysis shows that the attack is always well-incentivized in the long-run, but may not be so for a short duration. This implies that existing pool protocols are insecure, and if the attack is conducted systematically, Bitcoin pools could lose millions of dollars worth in months. The equilibrium state is a mixed strategy-that is-in equilibrium all clients are incentivized to probabilistically attack to maximize their payoffs rather than participate honestly. As a result, the Bitcoin network is incentivized to waste a part of its resources simply to compete.
To validate transactions, cryptocurrencies such as Bitcoin and Ethereum require nodes to verify that a blockchain is valid. This entails downloading and verifying all blocks, taking hours and requiring gigabytes of bandwidth and storage. Hence, clients with limited resources cannot verify transactions independently without trusting full nodes. Bitcoin and Ethereum offer light clients known as simplified payment verification (SPV) clients, that can verify the chain by downloading only the block headers. Unfortunately, the storage and bandwidth requirements of SPV clients still increase linearly with the chain length. For example, as of July 2019, an SPV client in Ethereum needs to download and store about 4 GB of data.Recently, Kiayias et al. proposed a solution known as noninteractive proofs of proof-of-work (NIPoPoW) that allows a light client to download and store only a polylogarithmic number of block headers in expectation. Unfortunately, NIPoPoWs are succinct only as long as no adversary influences the honest chain, and can only be used in chains with fixed block difficulty, contrary to most cryptocurrencies which adjust block difficulty frequently according to the network hashrate.We introduce FlyClient, a novel transaction verification light client for chains of variable difficulty. FlyClient is efficient both asymptotically and practically and requires downloading only a logarithmic number of block headers while storing only a single block header between executions. Using an optimal probabilistic block sampling protocol and Merkle Mountain Range (MMR) commitments, FlyClient overcomes the limitations of NIPoPoWs and generates shorter proofs over all measured parameters. In Ethereum, FlyClient achieves a synchronization proof size of less than 500 KB which is roughly 6,600x smaller than SPV proofs. We finally discuss how FlyClient can be deployed with minimal changes to the existing cryptocurrencies via an uncontentious velvet fork.
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