Profit Lag and Alternate Network Mining

Cyril Grunspan () and Ricardo Pérez-Marco
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Cyril Grunspan: Research Center, Léonard de Vinci Pôle University
Ricardo Pérez-Marco: CNRS, IMJ-PRG, Université Paris-Diderot

A chapter in Mathematical Research for Blockchain Economy, 2023, pp 115-132 from Springer

Abstract: Abstract For a mining strategy we define “profit lag” as the minimum time it takes to be profitable after that moment. We compute closed forms for the profit lag and the revenue ratio for the strategies “selfish mining” and “intermittent selfish mining”. This corroborates prior numerical simulations and provides further elucidation regarding the issue of profitability as discussed in the existing literature. We also study mining pairs of PoW cryptocurrencies, often coming from a fork, with the same mining algorithm. This represents a vector of attack that can be exploited using the “alternate network mining” strategy that we define. We compute closed forms for the profit lag and the revenue ratio for this strategy that is more profitable than selfish mining and intermittent selfish mining. It is also harder to counter since it does not rely on a flaw in the difficulty adjustment formula that is the reason for profitability of the other strategies.

Keywords: Bitcoin; Proof-of-work; Selfish mining; Intermittent selfish mining; Smart mining (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-48731-6_7

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