When Bitcoin Mining Pools Run Dry A Game-Theoretic Analysis of the Long-Term Impact of Attacks Between Mining Pools

Bitcoin has established itself as the most successful cryptocurrency with adoption seen in many commercial scenarios. While most stakeholders have jointly benefited from the growing importance of Bitcoin, conflicting interests continue to negatively impact the ecosystem. In particular, incentives to derive short-term profits from attacks on mining pools threaten the long-term viability of Bitcoin. We develop a game-theoretic model that allows us to capture short-term as well as long-term impacts of attacks against mining pools. Using this model, we study the conditions under which the mining pools have no incentives to launch attacks against each other (i.e., peaceful equilibria), and the conditions under which one mining pool is marginalized by attacks (i.e., one-sided attack equilibria). Our results provide guidelines for ensuring that the Bitcoin ecosystem remains long-term viable and trustworthy.