Bribery through Smart Contracts – Danger for Bitcoin Mining?

Could bribes paid through Smart Contracts undermine the general Bitcoin mining pool model?

A new research report sheds light on an attack mechanism characterised by the malicious use of a smart contract. Miners are to be prevented by payments from solving their cryptographic puzzle – an attack on the basis of mining itself.

Bitcoin mining is an energy-intensive and competitive process in which the participating parties try to find the next block for the network.

The paper entitled “Smart Contracts Make Bitcoin Mining Pools Vulnerable” was published by Yaron Velner of Hebrw University of Jerusalem. Jason Teutsch from the University of Alabama and Birmingham and Loi Luu from the National University of Singapore School of Computing are also involved.

The research published on March 7 describes how, in the right scenario, an attacker could use smart contracts to direct payments to Miner. These would then contain information before the pools (or other large alliances).

This would allow the malicious party to increase its share of profits relative to the pool hash rate. On the other hand, such an attack could also be used to damage an opposing pool in favor of its own pool.

The key is cryptosoft. The authors explain it as follows:

“The use of cryptosoft for such an attack is essential according to onlinebetrug. In fact, it is unlikely that several miners will join forces for such an attack unless their payment is otherwise guaranteed. In addition, the attack via a smart contract leaves the attacker anonymous and prevents the counterattack (e.g. by a Denial of Service attack), as well as the resulting shutdown.”

Why would you do that? Those who dig on their own and don’t have large hash rates run the risk of using all the power for nothing.

That’s why miners join together to form large pools, which provides a concentration of enormous hash power. The block reward (if there is one) is split, with the split varying according to the hash rate achieved.

With a Block withholding attack, a miner with large hashing power can split the reward between two pools by withholding a proof of work from one.

According to the authors, however, it was the development of smart contracts that made such coordinated attacks possible.

But such an attack is probably doomed to failure – especially by those who shy away from ethical concerns and others who don’t want to rely on smart contracts to get paid (because in the past such contracts hardly worked).

The paper is available here in English.

Comment by Danny de Boer:

And what if smart contracts are developed so far that they work? How far can we trust moral standards? Isn’t it also immoral for a Miner to dig chronically underpaid in his pool?

This kind of attack is only the threshold. If you think a little further, bribes could generally be made with smart contracts and the briber always remains a secret.

Top software for lobbyists? Let’s hope that we don’t slip into a ‘war of pools’ – after all, all pools have the same goal: making money by securing the (Bitcoin) network.

Mexico prepares for the digital future

Mexico gets its first Blockchain compound. Bitso, Volabit, BIVA, GBM, Lyna Capital, ConsenSys and Exponent Capital join forces. The companies are committed to educating the population about the technology. Above all, it is about arming oneself for the imminent technological revolution.

La Asociación Blockchain México – this is the name of the new association that has dedicated itself to the topic of blockchain in Mexico. The merger of the companies Bitso, Volabit, BIVA, GBM, Lvna Capital, ConsenSys and Exponent Capital aims at one thing above all: to inform the population about the Blockchain technology.

Mexico wants to create security for the Bitcoin formula

According to Forbes Mexico, the association is also interested in establishing Bitcoin formula technical and regulatory standards which are not a scam. Before the technology can spread any further, they want to create security in order to avoid dangers such as money laundering. However, the advantages of the technology are still in the foreground. Mouses Cassab, founder of Exponent Capital, told Forbes:

“The current applications of the blockchain range from reducing the costs of sending money transfers and international payments to democratizing the financial system,” he says.

In doing so, the association wants to prepare itself for the spread of blockchain technology and the technological progress that goes with it. In Germany, the association finds its counterpart in the Blockchain Bundesverband, which, among other things, has published a position paper on the subject.

Blockchain companies in Germany

The majority of German Blockchain companies are based in Berlin. Most of these companies deal with the topics finances and crypto currencies and were founded in the Bitcoin boom year 2017. More than half of the blockchain start-ups are already generating revenues. This is all the result of a study that BTC-ECHO carried out in cooperation with BlockState. If you want to know more about financing, turnover and the current stage of development of the companies, you can read it here.