Advertisement

But Why Does It Work? A Rational Protocol Design Treatment of Bitcoin

  • Christian Badertscher
  • Juan Garay
  • Ueli Maurer
  • Daniel Tschudi
  • Vassilis Zikas
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 10821)

Abstract

An exciting recent line of work has focused on formally investigating the core cryptographic assumptions underlying the security of Bitcoin. In a nutshell, these works conclude that Bitcoin is secure if and only if the majority of the mining power is honest. Despite their great impact, however, these works do not address an incisive question asked by positivists and Bitcoin critics, which is fuelled by the fact that Bitcoin indeed works in reality: Why should the real-world system adhere to these assumptions?

In this work we employ the machinery from the Rational Protocol Design (RPD) framework by Garay et al. [FOCS 2013] to analyze Bitcoin and address questions such as the above. We show that under the natural class of incentives for the miners’ behavior—i.e., rewarding them for adding blocks to the blockchain but having them pay for mining—we can reserve the honest majority assumption as a fallback, or even, depending on the application, completely replace it by the assumption that the miners aim to maximize their revenue.

Our results underscore the appropriateness of RPD as a “rational cryptography” framework for analyzing Bitcoin. Along the way, we devise significant extensions to the original RPD machinery that broaden its applicability to cryptocurrencies, which may be of independent interest.

References

  1. 1.
    Badertscher, C., Garay, J., Maurer, U., Tschudi, D., Zikas, V.: But why does it work? A rational protocol design treatment of bitcoin. Cryptology ePrint Archive, Report 2018/138 (2018). https://eprint.iacr.org/2018/138
  2. 2.
    Badertscher, C., Maurer, U., Tschudi, D., Zikas, V.: Bitcoin as a transaction ledger: a composable treatment. In: Katz, J., Shacham, H. (eds.) CRYPTO 2017. LNCS, vol. 10401, pp. 324–356. Springer, Cham (2017).  https://doi.org/10.1007/978-3-319-63688-7_11CrossRefGoogle Scholar
  3. 3.
    Github: Bitcoin Core Version 0.12.0. Wallet: Transaction Fees. https://github.com/bitcoin/bitcoin/blob/v0.12.0/doc/release-notes.md#wallet-transaction-fees
  4. 4.
    Bonneau, J.: Why buy when you can rent? In: Clark, J., Meiklejohn, S., Ryan, P.Y.A., Wallach, D., Brenner, M., Rohloff, K. (eds.) FC 2016. LNCS, vol. 9604, pp. 19–26. Springer, Heidelberg (2016).  https://doi.org/10.1007/978-3-662-53357-4_2CrossRefGoogle Scholar
  5. 5.
    Canetti, R.: Security and composition of multiparty cryptographic protocols. J. Cryptol. 13(1), 143–202 (2000)MathSciNetCrossRefzbMATHGoogle Scholar
  6. 6.
    Canetti, R.: Universally composable security: a new paradigm for cryptographic protocols. In: 42nd FOCS, pp. 136–145. IEEE Computer Society Press, October 2001Google Scholar
  7. 7.
    Carlsten, M., Kalodner, H.A., Weinberg, S.M., Narayanan, A.: On the instability of bitcoin without the block reward. In: Weippl, E.R., Katzenbeisser, S., Kruegel, C., Myers, A.C., Halevi, S. (eds.) ACM CCS 2016, pp. 154–167. ACM Press, October 2016Google Scholar
  8. 8.
    Eyal, I.: The miner’s dilemma. In: 2015 IEEE Symposium on Security and Privacy, pp. 89–103. IEEE Computer Society Press, May 2015Google Scholar
  9. 9.
    Eyal, I., Sirer, E.G.: Majority is not enough: bitcoin mining is vulnerable. In: Christin, N., Safavi-Naini, R. (eds.) FC 2014. LNCS, vol. 8437, pp. 436–454. Springer, Heidelberg (2014).  https://doi.org/10.1007/978-3-662-45472-5_28Google Scholar
  10. 10.
    Fuchsbauer, G., Katz, J., Naccache, D.: Efficient rational secret sharing in standard communication networks. In: Micciancio, D. (ed.) TCC 2010. LNCS, vol. 5978, pp. 419–436. Springer, Heidelberg (2010).  https://doi.org/10.1007/978-3-642-11799-2_25CrossRefGoogle Scholar
  11. 11.
    Garay, J.A., Katz, J., Maurer, U., Tackmann, B., Zikas, V.: Rational protocol design: cryptography against incentive-driven adversaries. In: 54th FOCS, pp. 648–657. IEEE Computer Society Press, October 2013Google Scholar
  12. 12.
    Garay, J.A., Katz, J., Tackmann, B., Zikas, V.: How fair is your protocol? A utility-based approach to protocol optimality. In: Georgiou, C., Spirakis, P.G. (eds.) 34th ACM PODC, pp. 281–290. ACM, July 2015Google Scholar
  13. 13.
    Garay, J., Kiayias, A., Leonardos, N.: The bitcoin backbone protocol: analysis and applications. In: Oswald, E., Fischlin, M. (eds.) EUROCRYPT 2015. LNCS, vol. 9057, pp. 281–310. Springer, Heidelberg (2015).  https://doi.org/10.1007/978-3-662-46803-6_10Google Scholar
  14. 14.
    Garay, J., Kiayias, A., Leonardos, N.: The bitcoin backbone protocol with chains of variable difficulty. In: Katz, J., Shacham, H. (eds.) CRYPTO 2017. LNCS, vol. 10401, pp. 291–323. Springer, Cham (2017).  https://doi.org/10.1007/978-3-319-63688-7_10CrossRefGoogle Scholar
  15. 15.
    Gervais, A., Karame, G.O., Wüst, K., Glykantzis, V., Ritzdorf, H., Capkun, S.: On the security and performance of proof of work blockchains. In: Weippl, E.R., Katzenbeisser, S., Kruegel, C., Myers, A.C., Halevi, S. (eds.) ACM CCS 2016, pp. 3–16. ACM Press, October 2016Google Scholar
  16. 16.
    Goldreich, O.: Foundations of Cryptography: Volume 1, Basic Tools. Cambridge University Press, Cambridge (2003)zbMATHGoogle Scholar
  17. 17.
    Gradwohl, R., Livne, N., Rosen, A.: Sequential rationality in cryptographic protocols. In: 51st FOCS, pp. 623–632. IEEE Computer Society Press, October 2010Google Scholar
  18. 18.
    Halpern, J.Y., Pass, R., Seeman, L.: Computational extensive-form games. In: EC (2016)Google Scholar
  19. 19.
    Katz, J.: Bridging game theory and cryptography: recent results and future directions. In: Canetti, R. (ed.) TCC 2008. LNCS, vol. 4948, pp. 251–272. Springer, Heidelberg (2008).  https://doi.org/10.1007/978-3-540-78524-8_15CrossRefGoogle Scholar
  20. 20.
    Katz, J., Maurer, U., Tackmann, B., Zikas, V.: Universally composable synchronous computation. In: Sahai, A. (ed.) TCC 2013. LNCS, vol. 7785, pp. 477–498. Springer, Heidelberg (2013).  https://doi.org/10.1007/978-3-642-36594-2_27CrossRefGoogle Scholar
  21. 21.
    Kol, G., Naor, M.: Games for exchanging information. In: Ladner, R.E., Dwork, C. (eds.) 40th ACM STOC, pp. 423–432. ACM Press, May 2008Google Scholar
  22. 22.
    Luu, L., Teutsch, J., Kulkarni, R., Saxena, P.: Demystifying incentives in the consensus computer. In: Ray, I., Li, N., Kruegel, C. (eds.) ACM CCS 2015, pp. 706–719. ACM Press, October 2015Google Scholar
  23. 23.
    Nakamoto, S.: Bitcoin: A Peer-to-Peer Electronic Cash System (2008). http://bitcoin.org/bitcoin.pdf
  24. 24.
    Nayak, K., Kumar, S., Miller, A., Shi, E.: Stubborn mining: generalizing selfish mining and combining with an eclipse attack. In: S&P (2016)Google Scholar
  25. 25.
    Ong, S.J., Parkes, D.C., Rosen, A., Vadhan, S.: Fairness with an honest minority and a rational majority. In: Reingold, O. (ed.) TCC 2009. LNCS, vol. 5444, pp. 36–53. Springer, Heidelberg (2009).  https://doi.org/10.1007/978-3-642-00457-5_3CrossRefGoogle Scholar
  26. 26.
    Osborne, M.J., Rubinstein, A.: A Course in Game Theory. MIT Press, Cambridge (1994)zbMATHGoogle Scholar
  27. 27.
    Pass, R., Seeman, L., Shelat, A.: Analysis of the blockchain protocol in asynchronous networks. In: Coron, J.-S., Nielsen, J.B. (eds.) EUROCRYPT 2017. LNCS, vol. 10211, pp. 643–673. Springer, Cham (2017).  https://doi.org/10.1007/978-3-319-56614-6_22CrossRefGoogle Scholar
  28. 28.
    Pass, R., Shi, E.: FruitChains: a fair blockchain. In: Schiller, E.M., Schwarzmann, A.A. (eds.) 36th ACM PODC, pp. 315–324. ACM, July 2017Google Scholar
  29. 29.
    Rosenfeld, M.: Analysis of bitcoin pooled mining reward systems. CoRR (2011)Google Scholar
  30. 30.
    Sapirshtein, A., Sompolinsky, Y., Zohar, A.: Optimal selfish mining strategies in bitcoin. In: Grossklags, J., Preneel, B. (eds.) FC 2016. LNCS, vol. 9603, pp. 515–532. Springer, Heidelberg (2017).  https://doi.org/10.1007/978-3-662-54970-4_30CrossRefGoogle Scholar
  31. 31.
    Schrijvers, O., Bonneau, J., Boneh, D., Roughgarden, T.: Incentive compatibility of bitcoin mining pool reward functions. In: Grossklags, J., Preneel, B. (eds.) FC 2016. LNCS, vol. 9603, pp. 477–498. Springer, Heidelberg (2017).  https://doi.org/10.1007/978-3-662-54970-4_28CrossRefGoogle Scholar
  32. 32.
    Teutsch, J., Jain, S., Saxena, P.: When cryptocurrencies mine their own business. In: Grossklags, J., Preneel, B. (eds.) FC 2016. LNCS, vol. 9603, pp. 499–514. Springer, Heidelberg (2017).  https://doi.org/10.1007/978-3-662-54970-4_29CrossRefGoogle Scholar

Copyright information

© International Association for Cryptologic Research 2018

Authors and Affiliations

  1. 1.ETH ZurichZürichSwitzerland
  2. 2.Texas A&M UniversityCollege StationUSA
  3. 3.Aarhus UniversityAarhusDenmark
  4. 4.University of Edinburgh and IOHKEdinburghUK

Personalised recommendations