Download This PaperToo Big to Cheat? Pools’ Incentives to Conduct Majority Attacks in Blockchain-Based Cryptocurrencies
69 Pages Posted: 10 Jan 2020 Last revised: 26 Nov 2025
Date Written: December 19, 2019
Abstract
The centralization of verification power within pools affects blockchain security. We propose a game-theoretic model to compare the incentives of pools versus individual verifiers in both Proof-of-Work (PoW) and Proof-of-Stake (PoS). Pool centralization affects security by diminishing the security advantage of PoS over PoW and increases majority attack risks in both systems due to lower per-block profits compared to verifiers, yet it enhances resilience by sustaining high attack costs during market downturns. In general, expected post-attack value losses align pool actions with stability. Supported by numerical illustrations, our research underscores how incentives for pools determine blockchain security, offering practical insights.
Keywords: Blockchain, Cryptocurrencies, Bitcoin, Double Spending Attacks, Cryptocurrencies, Majority Attacks, Proof-of-Work, Proof-of-Stake, Pools
JEL Classification: D43, E42, G29, G0, L1
Suggested Citation: Suggested Citation