Game Theoretic Analysis of Reputation Approach on Block Withholding Attack

Abstract

Bitcoin and the underlying technology blockchain introduced an open distributed system that incorporates Proof of Work and Nakamoto Consensus. Despite the broad adoption by enthusiasts, the consensus mechanism is vulnerable to certain issues, such as block withholding attack, selfish mining, and 51% attack. Various solutions have been proposed to address these problems. RepuCoin is one successful example, which claims to solve the selfish mining and 51% attack by adopting a novel reputation concept and modified BFT protocol. We generalize the reputation concept introduced in RepuCoin, and implement it in traditional Bitcoin system to analyze whether it can prevent the block withholding attack. We propose a reputation-based reward mechanism for the Bitcoin blockchain and a reward sharing schema for the mining pools. We model the utility of honest mining and block withholding attack for pools, and find that the inclusion of reputation in Bitcoin’s reward mechanism and pools’ reward schema can prevent mining pools from launching block withholding attack.