Research Suggests A Conspiracy Of Miners Could Destroy Bitcoin

A group of dishonest Bitcoin ‘miners’ could theoretically take control of the virtual currency ecosystem, warns a team of researchers from Cornell University, New York.

They say Bitcoin (BTC) is “broken” at the distributed protocol level, and miners could conspire to deceive the blockchain – a public record of every transaction in the network – in order to maximise their profits in the long run.

For such a conspiracy to work, the so-called ‘selfish’ miners need to command huge amounts of processing power. With the recent boom in the popularity of bitcoins and companies like CoinTerra manufacturing specialised hardware, this type of attack might already be happening.

Researchers propose a solution that could mitigate the risk of one group taking control of Bitcoin. However, they say the protocol will never be safe against attacks by a selfish mining pool that commands more than a third of the total mining power of the network.

How to kill Bitcoin

Bitcoin relies on an open-source, peer-to-peer Internet protocol, first introduced in 2009 by an anonymous developer known under the alias ‘Satoshi Nakamoto’.

The only way to generate new bitcoins is through mathematically intensive cryptography operations which require a lot of time and computational resources – the process better known as ‘mining’. Mining is usually done in groups, with everyone having a chance to mint a new Bitcoin block, currently worth 25 BTC, around every ten minutes.

The system assumes that all participants are honest, and report new bitcoins as soon as they are discovered. However, if a group of miners chose to keep the new blocks secret and not release the information into the blockchain, it could gain an unfair advantage.

Academics Ittay Eyal and Emin Gun Sirer say this group could stay ahead of the competition, which would be stuck solving cryptographical challenges that have already yielded bitcoins, losing time, effort and money.

“The key insight behind the selfish mining strategy is to force the honest miners into performing wasted computations on the stale public [blockchain] branch. Specifically, selfish mining forces the honest miners to spend their cycles on blocks that are destined to not be part of the blockchain,” explained the researchers.

In time, rational miners would prefer to join the selfish miners in order to maximise their profits, and the selfish group would increase its influence until it becomes a majority. At this point, Bitcoin would stop being decentralised, losing one of its most attractive properties. Control by a single entity could even lead to the complete collapse of the digital currency.

Researchers say that selfish mining is feasible for any group size of colluding miners, as long as they have enough hardware at their disposal. Indeed groups capable of such projects already exist.

Eyal  and Sirer propose a modification to the Bitcoin protocol that protects against selfish mining pools that command less than a quarter of the overall mining resources. But they say that the virual currency will never be completely safe against this type of attack.

What do you know about Bitcoin? Take our quiz!