Agent risk of miners

July 2, 2020

After the birth of Bitcoin, a special industry came into being: “mining”, the node that completes nonce calculation and packs blocks is called miner.

Every transaction we make on Bitcoin is recorded by these miners on the blockchain. As miners have the right to keep accounts, naturally they are very important to the special currency system, which makes us worry: can they affect our assets, such as turning away, disappearing, or not allowing us to trade? This kind of influence is the agent risk of miners.

To analyze the agent risk of miners, it is necessary to go deep into the mining process to determine which miners can make their own decisions and which are arranged by agreement or algorithm.

Taking BTC and ETH as an example, in the process of packaging, which transactions to choose, which data to package (such as time stamp), which nodes to broadcast to and which nodes to accept are all decided by the miners themselves; while the packing rules, the HASH after packaging, and the calculation of nonce value based on HASH are all agreed in the protocol and can be verified by the system, and can not be tampered with by miners at will.

According to this process, without the private key, it is impossible for a miner to forge a transfer out transaction, so it is impossible to transfer your money away. But miners can not let your deal package, or even add your address to the blacklist, as long as it is packaged, ignore your transaction. In addition, if there is a need to prioritize transactions, miners can rank your trades at the bottom or other designated transactions at the top.

selectively receive radio

Because miners can selectively receive radio, this will become an excuse: blacklisting an address can be said to have not received the transaction, and the blacklisted people can not find evidence of their being blacklisted from any data, so they can not trace the responsibility of miners.

Of course, for a pure miner, anything he wants to do is OK, as long as it meets the agreement. However, for the miners entrusted to the mine pool, if an address is included in the blacklist randomly, it should be regulated or explained. Because the relationship between the mine pool and the miner is the principal-agent relationship, it can not be guaranteed that the behavior is based on the interests of the miners rather than the interests of the mine pool. For this issue, we will write a separate article to discuss the agency risk of the mine pool.

From the above description, the impact of miners on individuals mainly includes preemptive transaction and exclusion transaction (blacklist, etc.), both of which will not cause asset loss on BTC (of course, time loss is also a kind of loss); at the same time, considering that the impact of a single miner is small (except for the mine pool), and the packed miners are generated randomly, these two kinds of agency risks will follow With the increase of nodes and the expansion of the system, it decreases. But if the development of the mine pool is more and more concentrated, it may be the opposite.

However, in ETH, due to the more complex logic contained in smart contracts, especially in the field of DeFi, the importance and relevance of a transaction has greatly increased, which means that the risk of miners’ agency has increased.

smart contracts

Taking 312 as an example, when there is a large-scale run on DeFi, the income risk structure of preemptive trading and excluding transaction becomes very important. At this time, there is “external incentive”: that is, miners are not motivated by ETH generated by package trading, but by the arbitrage value of various contracts on the chain, so that under the most open assumption (miners are completely based on their own total incentive) There may be all kinds of confusion in ETH, and miners have become the biggest beneficiaries of difi’s arbitrage interests.

Such confusion will affect the decentralized consensus of the public chain, especially if the mining pool does so, the negative impact will be doubled.

Of course, in the real world, miners and mining pools will be affected by various factors such as reputation, external supervision, community resistance and so on. Therefore, there are only a few miners who really dare to carry out such blatant external incentives. But this kind of potential risk still exists, especially the mine pool; because it conforms to the principal-agent structure of the current law, once the interests of the principal are damaged, it is likely to be accused by the traditional legal relationship, which is a high cost thing.

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