[bitcoin-dev] We need to fix the block withholding attack

Eric Lombrozo elombrozo at gmail.com
Sat Dec 26 08:26:54 UTC 2015

Note: my stupid email client didn't indent Peter Todd's quote correctly. 
The first paragraph is his, the second is my response.

------ Original Message ------
From: "Eric Lombrozo" <elombrozo at gmail.com>
To: "Peter Todd" <pete at petertodd.org>; "Emin Gün Sirer" 
<el33th4x0r at gmail.com>
Cc: nbvfour at gmail.com; "Bitcoin Dev" 
<bitcoin-dev at lists.linuxfoundation.org>
Sent: 12/26/2015 12:23:38 AM
Subject: Re[2]: [bitcoin-dev] We need to fix the block withholding 

>Peter Todd wrote:
>  Fixing block withholding is relatively simple, but (so far) requires a
>SPV-visible hardfork. (Luke-Jr's two-stage target mechanism) We should
>do this hard-fork in conjunction with any blocksize increase, which 
>have the desirable side effect of clearly show consent by the entire
>ecosystem, SPV clients included.
>I think we can generalize this and argue that it is impossible fix this 
>without reducing the visible difficulty and blinding the hasher to an 
>invisible difficulty. Unfortunately, changing the retargeting algo to 
>compute lower visible difficulty (leaving all else the same) or 
>interpreting the bits field in a way that yields a lower visible 
>difficulty is a hard fork by definition - blocks that didn't meet the 
>visible difficulty requirement before will now meet it.
>jl2012 wrote:
>>After the meeting I find a softfork solution. It is very inefficient 
>>and I am leaving it here just for record.
>>1. In the first output of the second transaction of a block, mining 
>>pool will commit a random nonce with an OP_RETURN.
>>2. Mine as normal. When a block is found, the hash is concatenated 
>>with the committed random nonce and hashed.
>>3. The resulting hash must be smaller than 2 ^ (256 - 1/64) or the 
>>block is invalid. That means about 1% of blocks are discarded.
>>4. For each difficulty retarget, the secondary target is decreased by 
>>2 ^ 1/64.
>>5. After 546096 blocks or 10 years, the secondary target becomes 2 ^ 
>>252. Therefore only 1 in 16 hash returned by hasher is really valid. 
>>This should make the detection of block withholding attack much 
>>All miners have to sacrifice 1% reward for 10 years. Confirmation will 
>>also be 1% slower than it should be.
>>If a node (full or SPV) is not updated, it becomes more vulnerable as 
>>an attacker could mine a chain much faster without following the new 
>>rules. But this is still a softfork, by definition.
>jl2012's key discovery here is that if we add an invisible difficulty 
>while keeping the retarget algo and bits semantics the same, the 
>visible difficulty will decrease automatically to compensate. In other 
>words, we can artificially increase the block time interval, allowing 
>us to force a lower visible difficulty at the next retarget without 
>changing the retarget algo nor the bits semantics. There are no other 
>free parameters we can tweak, so it seems this is really the best we 
>can do.
>Unfortunately, this also means longer confirmation times, lower 
>throughput, and lower miner revenue. Note, however, that confirmations 
>would (on average) represent more PoW, so fewer confirmations would be 
>required to achieve the same level of security.
>We can compensate for lower throughput and lower miner revenue by 
>increasing block size and increasing block rewards. Interestingly, it 
>turns out we *can* do these things with soft forks by embedding new 
>structures into blocks and nesting their hash trees into existing 
>structures. Ideas such as extension blocks 
>have been proposed before...but they add significant complications to 
>the protocol and require nontrivial app migration efforts. Old nodes 
>would not get forked off the network but backwards compatibility would 
>still be a problem as they would not be able to see at least some of 
>the transactions and some of the bitcoins in blocks. But if we're 
>willing to accept this, even the "sacred" 21 million asymptotic limit 
>can be raised via soft fork!
>So in conclusion, it *is* possible to fix this attack with a soft fork 
>and without altering the basic economics...but it's almost surely a lot 
>more trouble than it's worth. Luke-Jr's solution is far simpler and 
>more elegant and is perhaps one of the few examples of a new feature 
>(as opposed to merely a structure cleanup) that would be better to 
>deploy as a hard fork since it's simple to implement and seems to stand 
>a reasonable chance of near universal support...and soft fork 
>alternatives are very, very ugly and significantly impact system 
>usability...and I think theory tells us we can't do any better.
>- Eric
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