Selfish Behavior in the Tezos Proof-of-Stake Protocol

Neuder, Michael; Moroz, Daniel J.; Rao, Rithvik; Parkes, David C.

doi:10.48550/arxiv.1912.02954

Cited by 4 publications

(8 citation statements)

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“…Instead, a purely digital asset is used as collateral for the network and the network can control its supply to provide the desired properties. For an introductory background on PoS protocols and their complex security models, please see [27,28,48,17,41]. In this paper, we show that these purported benefits do not come for free.…”

Section: Introductionmentioning

confidence: 80%

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Competitive equilibria between staking and on-chain lending

Chitra¹

2020

Preprint

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Proof of Stake (PoS) is a burgeoning Sybil resistance mechanism that aims to have a digital asset ("token") serve as security collateral in crypto networks. However, PoS has so far eluded a comprehensive threat model that encompasses both Byzantine attacks from distributed systems and financial attacks that arise from the dual usage of the token as a means of payment and a Sybil resistance mechanism. In particular, the existence of derivatives markets makes malicious coordination among validators easier to execute than in Proof of Work systems. We demonstrate that it is also possible for on-chain lending smart contracts to cannibalize network security in PoS systems. When the yield provided by these contracts is more attractive than the inflation rate provided from staking, stakers will tend to remove their staked tokens and lend them out, thus reducing network security. In this paper, we provide a simple stochastic model that describes how rational validators with varying risk preferences react to changes in staking and lending returns. For a particular configuration of this model, we provide a formal proof of a phase transition between equilibria in which tokens are predominantly staked and those in which they are predominantly lent. We further validate this emergent adversarial behavior (e.g. reduced staked token supply) with agent-based simulations that sample transitions under more realistic conditions. Our results illustrate that rational, non-adversarial actors can dramatically reduce PoS network security if block rewards are not calibrated appropriately above the expected yields of on-chain lending.

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Section: Introductionmentioning

confidence: 80%

“…• Single validator per block: To simplify the model, we avoid using committees [22,47,25,23,10,15,44,41] and verifiers [5,6] as they add more variance and make both formal and simulation methods more difficult.…”

Section: Assumption 2 (Distributed Systems) All Communication Between...mentioning

confidence: 99%

Competitive equilibria between staking and on-chain lending

Chitra¹

2020

Preprint

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“…The present paper builds on Neuder et al [17], who study selfish mining in Tezos and show that it is sometimes more profitable to create a length-2 reorg than to follow the honest protocol. This previous work considered only selfish mining and not the possibility of reorgs conducted for the purpose of double-spends.…”

Section: Related Workmentioning

confidence: 92%

“…subsequent block is published. This is a common assumption in the selfish mining literature [9,13,17,20].…”

Section: The Tezos Proof-of-stake Protocolmentioning

confidence: 99%

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Defending Against Malicious Reorgs in Tezos Proof-of-Stake

Neuder

Moroz

Rao

et al. 2020

Proceedings of the 2nd ACM Conference on Advances in Financial Technologies

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Blockchains are intended to be immutable, so an attacker who is able to delete transactions through a chain reorganization (a malicious reorg) can perform a profitable double-spend attack. We study the rate at which an attacker can execute reorgs in the Tezos Proof-of-Stake protocol. As an example, an attacker with 40% of the staking power is able to execute a 20-block malicious reorg at an average rate of once per day, and the attack probability increases super-linearly as the staking power grows beyond 40%. Moreover, an attacker of the Tezos protocol knows in advance when an attack opportunity will arise, and can use this knowledge to arrange transactions to double-spend. We show that in particular cases, the Tezos protocol can be adjusted to protect against deep reorgs. For instance, we demonstrate protocol parameters that reduce the rate of length-20 reorg opportunities for a 40% attacker by two orders of magnitude. We also observe a trade-off between optimizing for robustness to deep reorgs (costly deviations that may be net profitable because they enable double-spends) and robustness to selfish mining (mining deviations that result in typically short reorgs that are profitable even without double-spends). That is, the parameters that optimally protect against one make the other attack easy. Finally, we develop a method that monitors the Tezos blockchain health with respect to malicious reorgs using only publicly available information.

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