Martijn Bastiaan - Preventing the 51%-attack: a Stochastic Analysis of Two Phase Proof of Work in Bitcoin

author:Martijn Bastiaan
title:Preventing the 51%-attack: a Stochastic Analysis of Two Phase Proof of Work in Bitcoin
keywords:secondary challenge, mining model, continuous-time Markov Chain, CTMC
committee:prof.dr. J.C. van de Pol (1st supervisor)
dr. M.I.A. Stoelinga
graduation date:30 January 2015 (mark: 9)


Abstract

The security of Bitcoin (a relatively new form of a dis- tributed ledger) is threatened by the formation of large public pools, which form naturally in order to reduce reward variance for individual miners. By introducing a second cryptographic challenge (two phase proof-of-work or 2P-PoW for short), pool operators are forced to either give up their private keys or provide a substantial part of their pool's mining hashrate which potentially forces pools to become smaller. This document provides a stochastic analysis of the Bitcoin mining protocol extended with 2P- PoW, modelled using CTMC s (continuous-time Markov chains). 2P-PoW indeed holds its promises, according to these models. A plot is provided for different ”strengths” of the second cryptographic challenge, which can be used to select proper values for future implementers.