Economic Security in Blockchain Systems

Abstract

A key scientific question underlying the blockchain ecosystem is to what extent the core security properties of the protocols hold when assuming rational validators in the presence of capable economic attackers. To what degree and at what cost can these systems be disrupted? In this thesis, I analyze the underlying economic security properties of three of the most fundamental decentralization consensus algorithms: proof of work (PoW), proof of stake (PoS), and oracle information aggregation. In Chapter 2 of this work, I counter a prominent narrative that PoW is inherently flawed in an environment in which double-spend attacks are possible. By considering counterattacks, I recover PoW robustness against reorganization attacks through a game-theoretic model. In particular, I consider hashrate markets as a potential vector of attack and show that PoW remains robust in this case. In Chapter 3 of this work, I show novel chain reorganization and finality-delay attacks on the PoS mechanism of Ethereum. These attacks are deviations from the ’honest’ staking strategy, and I show that for participants staking a substantial percentage of the network’s staked assets, these attacks can be cheap and destructive to the network. In Chapter 4 of this work, I design an incentive mechanism for the information aggregation of noisy signals that is highly resilient to bribery. I establish the asymptotic strength and limitations of this mechanism against various classes of bribery including an attacker able to condition bribes on individual reports and on the outcome of the information aggregation. I achieve strong protection even in the latter case. To do this, I assume the presence of a source of truth (SoT) that is prohibitively expensive for typical use but can be invoked infrequently. This robustness to bribes is achieved even while in equilibrium there is no invocation of the SoT.