Ethereum: Does selfish mining actually give an advantage in the absence of transaction fees, difficulty changes, and economic effects?

The Complexity of Selfish Mining in Ethereum

By “selfish mining” we mean the actions of a single entity or group of entities that attempt to manipulate the Ethereum network by taking control of the mining process, often without regard for the common good. The idea that selfish miners can increase their block reward ratio compared to honest miners has been extensively explored in the context of Ethereum design.

Ethereum Mining Basics

Ethereum’s proof-of-work consensus algorithm relies on hash collisions, which makes finding the correct solution to a block puzzle computationally expensive. Miners compete to be the first to solve this puzzle, and the winner gets to add the block header to the blockchain. The block reward is then awarded to miners who solved the previous puzzle.

Selfish Mining: A Challenge to Ethereum’s Centralized Nature

In traditional mining pools, members work together to solve a puzzle in a decentralized manner. However, in selfish mining scenarios, a single entity or group of entities can dominate the network by controlling a significant portion of its computing power. This concentration of resources gives them an unfair advantage over other mining companies.

Key Findings from the Cornell Paper

In their 2020 paper titled “Does Selfish Mining Confer an Advantage?”, authors Ethan Wrenn and Benjamin Zito conducted extensive research on the impact of selfish mining on Ethereum’s block reward rate. Here are some key points from their study:

• Block Reward Rate: In a selfish mining scenario, the ratio of a single miner’s block reward to an honest miner’s reward is often much higher.

• Computing Power: Selfish miners can accumulate and use a huge amount of computing power, giving them a significant advantage in solving the puzzle.

• Difficulty Changes: Selfish miners can manipulate the difficulty of the puzzle, allowing them to avoid potential increases in the block reward for honest miners.

Economic Impacts

The economic implications of selfish mining are also significant:

• Distribution of Block Rewards: The concentration of computing power and resources in selfish mining scenarios leads to an uneven distribution of rewards among honest miners.

• Incentive: Selfish miners are more likely to invest time, resources, and computing power into the network, thus creating a self-reinforcing cycle that benefits them at the expense of other miners.

Conclusion

While the idea of ​​selfish, preferential mining may seem appealing in theory, its practical implications for the decentralized Ethereum ecosystem are far-reaching. The concentration of computing power and resources in self-mining scenarios can have serious economic consequences, such as:

• Uneven distribution of rewards among honest miners

• Reduced incentive for honest miners to participate in the network

• Increased risk of centralization and reduced decentralization

Cornell’s paper provides valuable insight into the complex dynamics of selfish mining on Ethereum. As the network evolves, it is imperative to address these issues through design changes that promote fairness and decentralization.

Sources:

Wrenn, E. and Zito, B. (2020). Does selfish mining give you an advantage? Cornell University.