Attacking the blockchain

A recent paper by my colleagues showed that bitcoin mining’s dominated by about 20 computing farms, which apparently are located mostly in China.

This isn’t surprising: Blockchain mining centers on using special hardware (ASICs) designed to compute cryptographic hash values very rapidly, so a block chain mining cloud is just a massive array of these ASIC equipped computers.  These massive computing farms tend to be somewhat cheaper to build and operate in China, simply because the human costs of construction and management are low there.  It also helps to put them in places where electric power is cheap, and where cooling is easy to come by.  Turns out that China had all of these properties, and a big national semiconductor industry that designs and builds ASICS too.  (We aren’t talking about a sophisticated mathematical attack on the underlying cryptographic methods, just a brute force advantage that comes from owning more computers, and having more of these special hardware accelerators on them).

The question this raises is as follows:  what risks arise if some single country gains majority control over the Blockchain mining power for a particular currency?

Notice that we are talking here about a kind of brute-force control over the Blockchain.  Anyone could do it, by spending enough money on compute farms and specialized ASICs.  The key insight is that special hardware can be hundreds of thousands of times faster than desktop computing, for the kind of computation.  So you and your friends might run a Blockchain ledger on your home computers, and even configure them to crunch day and night trying to earn coins for you by extending the block chain, but because this involves solving cryptographic puzzles and the big farms collectively have millions of times more compute power, the probabilities favor those mining’s farms.  Most likely, those guys will win every single race to compute the next block, and pocket all the resulting coins.  So it isn’t a question of how many people are running the Blockchain software.  This is a story of how much compute power (and electric power, and money to build and operate the farm) you can dedicate.  The winner of that race will be the world leader in computing cryptographic hashes, and hence will dominate in extending the chain.  The issue arises for any Blockchain: Bitcoin, Ethereum, etc.

I talked this over with some friends who know their stuff, and thought I might share the list of weird attacks one can potentially launch once you have this sort of practical domination.

• Each new block is a set of transactions.  The dominating cartel could favor its own transactions, so that ones from less favored customers have very long clearing times, or perhaps never get logged at all.  They can effectively help friends and censor enemies: a big issue if the Blockchain is supposed to be fair.
• They could stop mining entirely.  This would cause chaos: new transactions would stop be logged, or be logged very, very slowly. The problem here is that the hardness of Blockchain schemes is a function of the mining power, so if the mining power suddenly drops drastically and the hardness remains the same, the rate of new blocks drops commensurately.
• As the main operators of the mining system, they would be in an unusual position to run compromised software, hence could collude among their farms, which is a way to further amplify the power of the cartel (there is a prior result by the Sirer and Eyal on this).
• They could  run two side-by-side Blockchains that start with the same prefix of blocks (by “forking” the original prefix), keeping one public and one secret.  Since they dominate the compute power by a large factor, they can run the public chain slowly, and the secret chain faster.  The secret chain will quickly become longer than the public one. Then one day they can suddenly release the secret chain.  This has the effect of rolling back every single block in the previously-public chain, because Blockchain software favors the longer chain.  So suddenly, every logged transaction in the public chain has been backed out!  This would allow double spending.  And such an attack could erase years of transactions.
• Same attack, but now suppose that the chain was also used to keep a ledger of contracts (for banking).  The rollback would effectively erase the tail of the ledger.  Those contracts might vanish entirely, or they could reappear at some other location or in some other order in the new chain (the previously secret one). Since some of the contract languages are state or order-sensitive, like hyperledger, this can change the meaning of the contracts. This risk arises because with hyperledger, one record can refer to a value defined in another record. 
• With knowledge of the secret chain, they could arbitrage.  For example, suppose that in the public chain, a million shares of Apple are sold at some price.  This might impact the actual share price of Apple.  But if the sale was erased in the secret chain, not only would we have chaos concerning ownership of the shares, we would also have impacted the price, and the attackers could exploit this knowledge to anticipate the impact and profit from it by placing bets in public exchanges, via futures contracts.

I bet this list isn’t exclusive.  Jump in with your own ideas!  But you can already see that basically, if you use Blockchain, you had better trust the operators of the majority of the mining power in the mining pool.  If you don’t, or if they turn on you, you could be seriously harmed down the road.

The bad news, obviously, is that apparently, today’s Blockchain systems are seriously at risk in this sense!