[SOLVED] FIT5214: Blockchain

FIT5214: Blockchain
Lecture 4: Proof-of-Work Lecturer:

https://dowsley.net

Copyright By Assignmentchef assignmentchef

Unit Structure
Lecture 1: Introduction to Blockchain
Lecture 2: Bitcoin
Lecture 3: Ethereum and Smart Contracts
Lecture 4: Proof-of-Work (PoW)
Lecture 5: Attacks on Blockchains
Lecture 6: Class Test/Alternatives to PoW
Lecture 7: Proof-of-Stake (PoS)
Lecture 8: Privacy
Lecture 9: Byzantine Agreement
Lecture 10: Blockchain Network
Lecture 11: Payment Channels
Lecture 12: Guest Lecture

Unit Structure
Lecture 1: Introduction to Blockchain
Lecture 2: Bitcoin
Introduction to Bitcoin consensus
Lecture 3: Ethereum and Smart Contracts How PoW consensus works;
Lecture 4: Proof-of-Work (PoW)
Lecture 5: Attacks on Blockchains
Lecture 6: Class Test/Alternatives to PoW
Lecture 7: Proof-of-Stake (PoS)
Lecture 8: Privacy
Lecture 9: Byzantine Agreement
Lecture 10: Blockchain Network
Lecture 11: Payment Channels
Lecture 12: Guest Lecture
Its impact on Bitcoin; Understand existing design flaws and attacks
Formal properties of PoW consensus
How to address/avoid some of them (some of them are open challenges)

How Bitcoin works? Recap!
1. How to create money?
2. How to spend money?
3. How to verify transactions? 4. Why do we need consensus?

Motivation
Lets vote
Give my coin c_1 to my coin c_1 to Construction Recap
1. Each block is referenced by the next block. e.g. H(block1) is included in the block2
2. Each block contains a set of transactions, organised as a Merkle tree
Ack: This picture is taken froms slides at Bitcoin summer school, Greece, 2016.

Bitcoin Puzzle Recap
Find a Nonce such that
h(prev hash,Nonce,TX1,TX2,,TXn) < Dwhere D is a diculty parameter. |Nonce| = 8 bytes |TX| 250 bytes h is SHA-256 |block| 1 MB n is about 4,000 D is recalculated every 2016 blocks (currently about 2 weeks) The process of solving this puzzle is called MiningNakamoto Consensus The longest chain wins! (Bitcoin assumes honest majority!)Consensus ThroughputThe number of transactions per second (TPS) Bitcoin can process.Average: 115-200 TPSAverage: 1,700 TPS Peak time: 56,000 TPS Consensus Throughput Roughly speaking: Each block is 1MB Each transaction is about 256 bytes Each block contains about 4000 transactions Each block is created every 10 minutes Group discussion:1.If you are going to design a MonashCoin (as Bitcoin+), what are the potential ways to increase the throughput of Bitcoin transactions? Why?2.Why is Bitcoin not already using your solution? What are the concerns?Consensus ThroughputTo increase throughput: Increase block size Decrease block creation time Graph of blocks to enable transaction inclusion in parallel Only record a checksum of transactions on the blockchain, and perform actual transactions in a payment channel (Week 11)Why 10 minutes and 1MB?It may not be the best choice: A new block should be created after most nodes learnt the previous block Disseminating blocks in the P2P network takes time Larger blocks take more time A shorter time creates more forks A shorter time reduces the difficulty of launching a double spending attack, unless the confirmation time is increased (details later) Bitcoin ABC (Adjustable Blocksize Cap): 32MB per block Bitcoin SV (Satoshi’s Vision): Potentially 2GB per blockEnforce Block Creation TimeHow to guarantee 10 minutes per block? Difficulty parameter Two weeks = 20160 minutes14 days * 24 hours/day * 60 minutes/hour = 20160 minutes10 minutes per block2016 blocks in two weeksEnforce Block Creation TimeHow to guarantee 10 minutes per block? Difficulty parameter!Four weeks One week 2016 blocks in two weeks Do not change Difficulty * 2 Difficulty * 1/2Evolving Difficulty https://www.blockchain.com/charts/difficulty?timespan=allBitcoin Consensus: Longest Chain Rule#Votes = 3 #Votes = 2ConfirmationThe number of blocks confirmed the validity of a transactionTransactions in block 1 has 2016 confirmations Transactions in block 2 has 2015 confirmations …Transactions in block 2015 has 2 confirmations Transactions in block 2016 has 1 confirmationFor security reasons, it is recommended to wait many confirmations (Are 6 confirmations good enough?) Read more: https://en.bitcoin.it/wiki/ConfirmationConfirmationEach block is created every 10 minutes 1 confirmation – 10 minutes 2 confirmation – 20 minutes … 5 confirmation 50 minutes 6 confirmation 1 hourGo and get coffee!The number of blocks confirmed (the validity of a transaction)Cappuccino please!$5, thanks! BTC accepted. Go and get coffee!The number of blocks confirmed (the validity of a transaction)OK, here is my TxOK, come back in an hour (6 confirmations) What if no confirmation at all?Group discussion:1. What is the security problem if no confirmation is required?2. Any solution you can propose? Race Attack (0-confirmation)OK, here is my TxOK, here is your coffee! Race Attack (0-confirmation)Create Tx to myselfTx is invalid!Tx is invalid!The Tx is invalid!Tx is invalid! Tx is invalid!Tx is invalid! is invalid!Tx is invalid!Race Attack (0-confirmation)More miners working on Tx rather thanFree coffee!Requirement: Faster networkWhat is the assumption in this example? (0-confirmation)OK, here is my TxOK, here is your coffee!Create Tx and TxCreate a block B containing TxThe entire network only accepts TxFree coffee!Requirement: Some mining power (0-confirmation)Alice launches a Finney attack as follows:Step 1. Create a valid transaction TX_1 to transfer a coin to PK_Alice;Alice does NOT broadcast TX_1!Step 2. Create a valid block B containing TX_1 through block mining;Alice does NOT broadcast the block, for now! (So, to the network, the coin is unspent.)Step 3. Create a valid transaction spending the coin to PK_service;Step 4. Once the transaction is accepted by a 0-confirmation service, then broadcast B.How about 1-confirmation?Vector76 attack (Finney attack+Race attack)1. Create two transactions Tx and Tx2. Create a block B containing Tx3. Send Tx to Payee4. Wait for a block B containing Tx(keep mining on B)5. Send B to the network faster than BFinney attack: Step 1-4 Race attack: Step 5Group Discussion Group Discussion1. What are the possible ways to gain extra advantages on including your own transaction? 2. Why?3. How to fix?More Confirmations?51% Attackc_1 to Jiangshan c_1 to an attacker has >50% CPU power, it can spend a coin more than once.

51% Attack

Whats wrong?
The attack is on the Bitcoin consensus!

Terminology: Node
A node, or replica, is a single actor in the system.
In a computer network, the computers are the nodes;
In Blockchain, a node can be of different types:
A client node is a node which only stores a part of the blockchain.
A full node is a node which stores all the data of the blockchain;
e.g. blockchain explorer/backup server
NOTE: miners are full nodes!
The total number of nodes in the system is n. (unless otherwise specified)
Each node may have different powers in voting, we call the total voting power in the system is P.

What is consensus?
Definition 1. (Consensus.) There are n nodes, of which at most f can be malicious, i.e., at least n f nodes are correct. For all i 2 [1, n], node i starts with an input value vi. The nodes must decide for one of those values, satisfying the following properties:
Agreement: All correct nodes decide for the same value.
Termination: All correct nodes terminate in finite time.
Validity: The decision value must be the input value of a node.

Agreement cannot be reached

PoW consensus
Assuming a synchronous network, PoW guarantees eventual consistency, or more actually, nodes in PoW agrees on a Common Prefix of the blockchain.

Eventual Consistency
Eventually, all the nodes will agree on the same blockchain
but some day in the future

Common Prefix
Global view:
Node 1: Node 2: Node 3:

PoW Consensus
Assuming a synchronous network, PoW guarantees eventual consistency, or more actually, nodes in PoW agrees on a Common Prefix of the blockchain.
T-consistency is used to quantify the quality of the blockchain consensus after cutting down the last T blocks, all nodes should agree on the rest of the blockchain.

T-Consistency
Global view:
Node 1: Node 2: Node 3:
2-Consistency

T-Consistency
Global view:
Node 1: Node 2:
1-Consistency
The best consistency is 0-consistency, which can be provided by traditional consensus protocols (Week 9)

Chain Growth

Chain Quality
Adversarial contribution = 2/8 = 25%
Ideal Chain Quality

Is 51% attack feasible?
You need to control >51% hashing power in the world of Bitcoin!!
Hard forks and competing coins reduce the mining power of a single chain!

51% Attacks

Assumption v.s. Reality
Assumption
13 July 2014
https://99bitcoins.com/wp-content/uploads/2014/06/PPVr0Wv.png

Mining Pool
Bitcoin mining process
Mining locally
latest block
Proof-of-Work Mining reward

Mining Pool
A single miner is likely to lose money
Electricity cost + machine cost > revenue
Bitcoin mining process

Mining Pool
1 Distribute mining tasks 2 Submit solutions
3 Claim rewards
4 Shares reward according to contribution
latest block
pool server
Proof-of-Work Mining reward

31-Jan.-2018
https://www.blockchain.com/en/pools

15 Oct 2018 >85% Mining power (14 pools) 52.5%
https://www.blockchain.com/en/pools

29 May 2019 90.8% Mining power (11 pools) 55.9%

Is 51% attack feasible?
https://coin360.com

PoW 51% Attack Cost
https://www.crypto51.app

Deconstructing Blockchains: A Comprehensive Survey on Consensus, Membership and Structure
https://arxiv.org/pdf/1908.08316.pdf

Take home message:
1. Blockchain is not as secure as you may think
2. There are many possible attacks on blockchains, including Bitcoin 3. Design details matter a lot!
4. DO NOT LAUNCH ATTACKS!
(You can try attacks in a testnet, but dont do it on the real network!)
Try to find other possible attacks on Bitcoin-like system, and we will discuss next week!
(Ethics matters!)
Advanced attacks on blockchain next week!

CS: assignmentchef QQ: 1823890830 Email: [email protected]