Mining Bitcoin Space and Goldman Sachs

The Bitcoin cryptocurrency records its transactions in a public log called the blockchain. Its security rests critically on the distributed protocol that maintains the blockchain, run by participants called miners.Conventional wisdom asserts that the protocol is incentive-compatible and secure against colluding minority groups, i.e. it incentivizes miners to follow the protocol as prescribed.We show that the Bitcoin protocol is not incentive-compatible. We present an attack with which colluding miners obtain a revenue larger than their fair share. This attack can have significant consequences for Bitcoin: Rational miners will prefer to join the selfish miners, and the colluding group will increase in size until it becomes a majority. At this point, the Bitcoin system ceases to be a decentralized currency.Selfish mining is feasible for any group size of colluding miners. We pro-pose a practical modification to the Bitcoin protocol that protects against selfish mining pools that command less than 1/4 of the resources. This threshold is lower than the wrongly assumed 1/2 bound, but better than the current reality where a group of any size can compromise the system.