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Addressing the possibility of profitable fee manipulation attacks

Addressing the possibility of profitable fee manipulation attacks

Original Postby Nagaev Boris

Posted on: December 18, 2023 00:30 UTC

In the discussion of potential collusion among miners in a blockchain network, the concept of equilibrium is challenged.

Miners have the incentive to defect from a collusive agreement by engaging in deceptive practices that increase their profits. By underreporting their actual hashrate—for instance, claiming it to be 5% when it is truly 10%—they can contribute less to the costs associated with fee-stuffing transactions while simultaneously earning fees from both their disclosed and undisclosed mining activities. This deceitful approach involves secretly allocating a portion of their hashrate to a new pool, thereby benefiting from the collective arrangement without bearing the proportional costs. Given that such behavior would lead to an advantageous outcome for any rational miner, there is an expectation that over time more participants will adopt this strategy, thus reducing the overall number of miners engaged in the collusion. This analysis suggests that the stability of such collusive agreements is inherently undermined by the individual incentives of participants, ultimately leading to a decline in the ratio of miners taking part in the collusion.

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