'Zero Cost' Majority Attacks on Permissionless Blockchains

27 Pages Posted: 17 Jul 2023 Last revised: 7 Dec 2023

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Hanna Halaburda

New York University (NYU) - Leonard N. Stern School of Business

Date Written: August 3, 2023

Abstract

The core premise of permissionless blockchains is their reliable and secure operation without the need to trust any individual agent. At the heart of blockchain consensus mechanisms is an explicit cost (e.g., mining cost) for participation in the network and the opportunity to add blocks to the blockchain. A key rationale for that cost is to make attacks on the network, which could be theoretically carried out if a majority of nodes were controlled by a single entity, too expensive to be worthwhile. We demonstrate that a majority attacker can successfully attack with a {\em negative net cost}, when accounting for the mining rewards the attacker collects during the attack. This shows that the protocol mechanisms are insufficient to create a secure network, emphasizing the importance of socially driven mechanisms external to the protocol. At the same time, negative cost enables a new type of majority attack that is more likely to elude external scrutiny.

Keywords: consensus, transaction fees, blockchain, bitcoin, proof of work, proof of stake

JEL Classification: D42, D80

Suggested Citation

Gans, Joshua S. and Halaburda, Hanna, 'Zero Cost' Majority Attacks on Permissionless Blockchains (August 3, 2023). Available at SSRN: https://ssrn.com/abstract=4505460 or http://dx.doi.org/10.2139/ssrn.4505460

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hanna Halaburda

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

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