Paper 2017/731

Revisiting Difficulty Control for Blockchain Systems

Dmitry Meshkov, Alexander Chepurnoy, and Marc Jansen

Abstract

The Bitcoin whitepaper states that security of the system is guaranteed as long as honest miners control more than half of the current total computational power. The whitepaper assumes a static difficulty, thus it is equally hard to solve a cryptographic proof-of-work puzzle for any given moment of the system history. However, the real Bitcoin network is using an adaptive difficulty adjustment mechanism. In this paper we introduce and analyze a new kind of attack on a mining difficulty retargeting function used in Bitcoin. A malicious miner is increasing his mining profits from the attack, named coin-hopping attack, and, as a side effect, an average delay between blocks is increasing. We propose an alternative difficulty adjustment algorithm in order to reduce an incentive to perform coin-hopping, and also to improve stability of inter-block delays. Finally, we evaluate the presented approach and show that the novel algorithm performs better than the original algorithm of Bitcoin.