Selfish Mining Explained

Selfish mining is a technique followed by a group of crypto miners or a mining pool that deliberately hides newly mined blocks from the public blockchain. Instead of broadcasting them to the network, they keep them private and continue mining them secretly. Thus, they create a delay while creating a fork of the primary blockchain, which is longer than the original one.

By secret mining, they try to waste the computational power of honest miners and make them work on blocks that will eventually become orphaned. The idea is to stay ahead of honest miners by releasing their hidden blocks when they are ahead of the primary blockchain.

Selfish mining lets miners slow down the network and earn more mining rewards. It questions the fairness of the system and poses a threat to decentralization. Selfish mining is not about hacking or breaking encryption, but miners taking advantage of the rules and incentives of the crypto network and manipulating the system.

How does Selfish Mining Work?

Crypto mining involves nodes within a blockchain network verifying and confirming transactions. Miners are rewarded with newly generated tokens in exchange for their computational efforts. In the case of selfish mining, a group of miners withholds newly mined blocks from the main blockchain, strategically revealing them later to gain an advantage.

Selfish mining was first introduced in a 2013 paper by Cornell researchers Emin Gün Sirer and Ittay Eyal. They demonstrated that miners could potentially increase their Bitcoin earnings by concealing newly mined blocks from the main blockchain, thereby creating a fork. By strategically releasing the hidden chain at the right moment, these miners could manipulate the blockchain in their favor.

All proof-of-work (PoW)-based crypto networks depend on nodes/miners for validating transactions. Often, these miners use robust mining rigs to solve complex cryptographic puzzles and mine new blocks. When they solve the blocks successfully and open new blocks, the miners will receive transaction fees and freshly mined cryptocurrencies as mining rewards.

Let’s analyze how selfish mining works.

1. Withholding Mined Blocks

Generally, when a miner discovers a new block, it is immediately broadcast to the entire network. However, in selfish mining, the miners withhold the block and continue to privately build on their own secret chain.

2. Building a Fork

As the public network mines on the most recently known block, selfish miners continue building on top of their hidden block. If they manage to discover another block before the public chain catches up, they widen the gap and strengthen their advantage.

3. Strategic Reveal

Selfish miners try to manipulate the honest miners by strategically broadcasting their private chain. For instance, if the honest miners find a new block and the primary chain equals the length of the selfish miner’s fork chain, those selfish miners will release their secret chain to override the honest miner’s primary chain.

On the flip side, if the primary chain catches up to the secret chain, these selfish miners just release minimum blocks to maintain dominance.

4. Orphaning Honest Blocks

When the selfish miners broadcast their longest chain, all honest blocks created simultaneously get orphaned, meaning the network discards them. Thus, the honest miners will not receive any rewards. All of their computational resources go in vain.

5. Increasing Profit Margins

Using a manipulative strategy, selfish miners can earn more block rewards than their proportional share of the network’s hash power. For instance, a mining pool with just 40% of the network’s hashing power might receive more than 40% of the rewards by successfully employing selfish mining techniques.

At the end, Sirer and Eyal examined the resource wastage on both chains and proposed that selfish miners held a competitive edge over honest miners. This advantage stemmed from the fact that, even after considering the wasted resources, selfish miners still earned relatively higher rewards.

Risks Associated with Selfish Mining

Selfish mining poses a potential threat to the blockchain network in the following ways.

1. Centralization

Selfish mining encourages the grouping of smaller miners to gain more profits. That, in turn, leads to the centralization of the network, contradicting the decentralized nature of traditional blockchains, including Bitcoin.

2. Not Secure

When honest miners lose rewards and become discouraged, the network’s overall effective hash power declines. This drop in hash rate weakens the network’s security, making it more susceptible to threats like double-spending or 51% attacks.

3. Confusion

Frequent chain reorganizations caused by selfish mining can lead to network instability, disrupting wallet balances, delaying transaction confirmations, and undermining user trust.

4. Not Reliable

Blockchain is known for its decentralized nature, security, and integrity. The selfish mining poses a threat to all of those features, questioning the blockchain’s integrity.

Is Selfish Mining a Threat?

Emin Gün Sirer and Ittay Eyal provided strong evidence suggesting that a blockchain can be manipulated through forking, allowing a group to gain an advantage over honest miners. They argue that once other rational miners observe the increased profitability of the selfish group, they are likely to join in pursuit of higher rewards.

However, this view is not universally accepted. Some researchers question the actual incentives, feasibility, and risks associated with selfish mining. For instance, in 2017, Craig Wright demonstrated that selfish miners wouldn’t generate more blocks or earn more rewards than they would by simply mining honestly.

In 2018, Jake Gober proposed that if selfish mining truly offered greater profitability than honest mining, it would likely be widely adopted by miners. He showed that although selfish mining can indeed be more lucrative, the presence of multiple selfish miners or groups on the same network would lead to competition between forks, ultimately diminishing the overall profitability of the strategy.

Interestingly, Zhaojie Wang and his colleagues noted in their research that, up until the end of 2021, there had been no documented cases of selfish mining attacks occurring in real-world scenarios.

Arguments from both perspectives imply that although selfish mining attacks are theoretically possible, they might remain largely academic. It’s also possible that such an attack has already taken place but went undetected.

However, it’s more reasonable to believe that most cryptocurrency miners act with genuine intentions. Popular blockchains remain secure largely due to the sheer number of participants involved.

The greater the number of users in a blockchain network, the faster it can process transactions and the stronger its security becomes. In the case of Bitcoin, the network is so vast and efficient that even a coordinated attack by a group of malicious actors would struggle to gain control.

Mitigation Strategies for Selfish Mining

Selfish mining poses a significant threat to blockchain networks, as it not only unfairly takes rewards from honest miners but also leads to discrepancies in how different users perceive the blockchain’s state.

Recent research has revealed that cryptocurrencies other than Bitcoin are considerably more vulnerable to this type of attack. Furthermore, as of now, it remains challenging to reliably distinguish selfish mining from natural network partitions.

1. Uniform Tie-Breaking

The initial self mining defense proposed was that an honest miner picks a branch uniformly at random among the longest chains in case of ties. This defense is known as uniform tie-breaking. This defense method against the selfish mining attack achieves security up to a hashing power of 25%. However, the later optimized attack proposal reduced this to 23.2%.

2. Freshness Preferred

Heilman suggests using timestamps as a tie-breaking mechanism to lower the potential earnings of selfish miners. In the event of a tie between competing branches, miners select the one that appears more recent, specifically, the branch whose timestamps (TS) are closest to the current time (τ). This approach is known as the “Freshness Preferred” (FP) rule.

As the core proposal, the author advocated for the use of a trusted timestamp (TS) authority that issues unforgeable timestamps to be embedded within blocks, aiming to eliminate the risk of tampering.

When timestamps are generated with extremely high precision, the scheme is claimed to enhance resistance to selfish mining up to a threshold of 33.3% hashing power and optimal selfish mining up to 30.1%. However, this approach introduces concerns around centralization and is vulnerable to new types of attacks, which we outline.

3. Publish or Perish (PP)

This approach ensures incentive compatibility against optimal selfish mining up to a hashing power of 25.0%. The study highlights that under this method, an attack could lead to an average delay of 18.5 blocks before reaching a consensus in the event of a tie.

However, we emphasize that such an attack is not feasible and that honest miners can achieve consensus instantly, even in the case of a tie. Nonetheless, in environments where synchronized clocks are absent, the Publish or Perish protocol remains the most secure known solution.

Selfish Mining in Other Cryptocurrencies

Although Bitcoin is the most frequently discussed in the context of selfish mining, any cryptocurrency using Proof of Work (PoW) is potentially at risk. For instance:

• Ethereum (pre-merge) also faced concerns around selfish mining, particularly because of its shorter block times.
• Smaller cryptocurrencies tend to be more susceptible due to their lower hash rates and less advanced network infrastructure.

The impact of the attack depends on several factors, including block time, block size, network latency, and the behavior of miners.

Ethical Considerations

Although selfish mining isn’t illegal, it is broadly considered unethical. It goes against the collaborative spirit that supports decentralized systems. That said, those who engage in it often argue that they’re simply optimizing their profits within the boundaries of the protocol. Therefore, blockchain developers must create incentive structures and protocol rules that actively deter such behavior.

Here are some ethical considerations related to selfish mining.

1. Breach of Fairness

Selfish mining compromises the fundamental principle of fairness in blockchain networks by enabling malicious miners to earn more than their rightful share of rewards. In contrast, honest miners who adhere to the protocol end up receiving significantly less compensation.

2. Diminished Trust

Blockchain networks depend on trust in a decentralized and transparent protocol. Selfish mining weakens this trust among participants, potentially deterring future adoption and investment in the system.

3. Risk of Centralization

Effective selfish mining can result in greater centralization, as malicious miners gain more rewards and control over the network. This goes against the core principle of decentralization that most blockchain systems strive to uphold.

4. Damage to Smaller Networks

In weaker networks, selfish mining has the potential to destabilize the entire system. It poses a threat to innovation within the cryptocurrency space, as it increases the risks for newer or smaller coins trying to survive.

5. Exploitation of Protocol Vulnerabilities

Selfish mining capitalizes on known flaws in consensus protocols instead of contributing positively to the network. Ethically, it is seen as exploiting the system for personal benefit rather than striving for the betterment of the network.

6. Effect on Network Performance

By deliberately delaying block publication, selfish miners can hinder transaction processing and create more orphaned blocks. This results in a poorer user experience and diminishes the overall reliability of the network.

7. Undermining Open Collaboration

The blockchain community places high value on open-source collaboration and transparency. Selfish mining fosters secretive, competitive behavior that goes against these community-driven principles.