TL;DR
Bitcoin follows the rule "one CPU, one vote." If you have 10% of the power, you get 10% of the rewards.
A "Selfish Miner" finds a new block but hides it instead of publishing it. They secretly mine on top of it, building a private chain.
When the rest of the network finally finds a block, the Selfish Miner reveals their longer, secret chain.
The network accepts the selfish chain as the "winner". The honest miners' work is discarded. As a result, Selfish Miners receive a higher share of rewards than their power share would suggest. The results show that a group with 33% of the total hashpower can earn revenue more than 33% of the total rewards.
How Bitcoin works?
The core idea behind Bitcoin is trustlessness. We don't trust banks, we don't trust governments, and we certainly don't trust other people on the network. We only trust the math and the protocol rules.
The long-held conventional wisdom assumes that Bitcoin is "fair". If you own 10% of the total computing power (hashrate) of the network, you should, on average, win 10% of the block rewards.
For years, everyone assumed that the only way to attack the network was the notorious "51% attack", where you physically control the majority of the network.
But in 2013, researchers Ittay Eyal and Emin Gün Sirer published a paper that challenged this view. They proved mathematically that a minority group of miners (with 33% of the total hashrate) could game the system and earn more than their fair share of the power.
They called this strategy Selfish Mining.
The Golden Rule: The Longest Chain Wins
The Bitcoin network follows a simple directive to keep everyone in sync: Always believe the longest chain of blocks.
If the network temporarily splits (two miners find different blocks at the same time), the tie is broken as soon as someone finds the next block on top of one of them, making that chain longer. Everyone else then abandons the shorter chain and switches to the winner.
The blocks on the abandoned shorter chain are called "orphaned blocks." They are worthless. The miners who spent electricity creating them get zero reward.
Once a miner finds a block, they immediately broadcast it to the entire world so everyone else can add it to their chain and start working on the next one.
How the Selfish Mining strategy works?
Instead of telling the network they found a block, the selfish miners "withhold" it. They keep it secret.
Why? Because now they have a head start.
While the rest of the honest world is still trying to solve the puzzle for the current block, the selfish pool is already secretly working on the next block on top of their hidden one. They are building a private chain.
Just as the honest builders find their block, the selfish pool reveals its private chain. If the two branches (public and private) are the same length, a race will ensue. If the private chain is longer, everyone switches to it.
What did the selfish miner gain
- They won the block rewards for their secret blocks.
- Crucially, they caused honest miners to waste vast amounts of electricity and time mining blocks that ended up getting orphaned.
By invalidating the work of honest miners, the selfish pool essentially increases its own slice of the pie relative to everyone else. If executed correctly over time, a pool with 33% of the power could end up earning more than 33% of the rewards.
Fig 1. Relative pool revenue (rewards share) against pool size (hashrate share). The selfish mining revenue grows super-linearly with pool size, while honest mining graph is linear as expected. When the pool crosses the 1/3 threshold in size, it enjoys revenues larger than its fair size share
Why is it dangerous? Because other miners, seeing higher returns from the selfish pool, would want to join it. The pool can quickly grow to a majority of the network, making the system no longer decentralized.
Why Isn't Bitcoin Broken Then?
If this strategy exists, why isn't everyone doing it? Why hasn't Bitcoin collapsed?
Due to the widespread awareness of the vulnerability, it is really hard to perform the attack unnoticed. If a large pool started selfishly mining, the rate of orphaned blocks across the network would skyrocket. Once the network realizes it is under attack, it can take countermeasures (e.g., blacklisting the selfish pool's blocks).
Moreover, once the community realizes the network is being attacked, faith in Bitcoin will crumble, and the price will likely crash. The selfish miners would be winning extra pieces of a pie that is rapidly becoming worthless.
Summary
Selfish mining is a fascinating bit of game theory that proves our conventional wisdom about Bitcoin's fairness wasn't entirely correct. It shows that under specific conditions, a minority group can earn more than its share of hashrate by strategically withholding information, thereby wasting its competitors' resources.
Top comments (0)