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  4. Breaking Blockchain Rationality with Out-of-Band Collusion
 
conference paper

Breaking Blockchain Rationality with Out-of-Band Collusion

Zhang, Haoqian  
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Bastankhah, Mahsa
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Merino, Louis-Henri Manuel Jakob  
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Essex, A
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Kulyk, O
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January 1, 2024
Financial Cryptography And Data Security. Fc 2023 International Workshops, Fc 2023
8th Workshop on Advances in Secure Electronic Voting (Voting) / 4th Workshop on Coordination of Decentralized Finance (CoDecFin) / 3rd Workshop on Decentralized Finance (DeFi) / 7th Workshop on Trusted Smart Contracts (WTSC)

Blockchain systems often rely on rationality assumptions for their security, expecting that nodes are motivated to maximize their profits. These systems thus design their protocols to incentivize nodes to execute the honest protocol but fail to consider out-of-band collusion. Existing works analyzing rationality assumptions are limited in their scope, either by focusing on a specific protocol or relying on nonexisting financial instruments. We propose a general rational attack on rationality by leveraging an external channel that incentivizes nodes to collude against the honest protocol. Our approach involves an attacker creating an out-of-band bribery smart contract to motivate nodes to double-spend their transactions in exchange for shares in the attacker's profits. We provide a game theory model to prove that any rational node is incentivized to follow the malicious protocol. We discuss our approach to attacking the Bitcoin and Ethereum blockchains, demonstrating that irrational behavior can be rational in real-world blockchain systems when analyzing rationality in a larger ecosystem. We conclude that rational assumptions only appear to make the system more secure and offer a false sense of security under the flawed analysis.

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