arXiv subjects

Aviv Yaish

Publications and source records attributed to Aviv Yaish.

22 records · Page 2Linked to original sources

arXiv2024

Barriers to Collusion-resistant Transaction Fee Mechanisms

To allocate transactions to blocks, cryptocurrencies use an auction-like transaction fee mechanism (TFM). A conjecture of Roughgarden [44] asks whether there is a TFM that is incentive compatible for both the users and the miner, and is also resistant to off-chain agreements (OCAs) between these parties, a collusion notion that captures the ability of users and the miner to jointly deviate for profit. The work of Chung and Shi [12] tackles the problem using the different collusion resistance notion of side-channel proofness (SCP), and shows an impossibility given this notion. We show that OCA-proofness and SCP are different, with SCP being strictly stronger. We then fully characterize the intersection of deterministic dominant strategy incentive-compatible (DSIC) and OCA-proof mechanisms, as well as deterministic MMIC and OCA-proof ones, and use this characterization to show that only the trivial mechanism is DSIC, myopic miner incentive-compatible (MMIC) and OCA-proof. We also show that a randomized mechanism can be at most 0.842-efficient in the worst case, and that the impossibility of a non-trivial DSIC, MMIC and OCA-proof extends to a couple of natural classes of randomized mechanisms.

cs.GT↗

arXiv2023

Pricing ASICs for Cryptocurrency Mining

Cryptocurrencies that are based on Proof-of-Work (PoW) often rely on special purpose hardware to perform so-called mining operations that secure the system, with miners receiving freshly minted tokens as a reward for their work. A notable example of such a cryptocurrency is Bitcoin, which is primarily mined using application specific integrated circuit (ASIC) based machines. Due to the supposed profitability of cryptocurrency mining, such hardware has been in great demand in recent years, in-spite of high associated costs like electricity. In this work, we show that because mining rewards are given in the mined cryptocurrency, while expenses are usually paid in some fiat currency such as the United States Dollar (USD), cryptocurrency mining is in fact a bundle of financial options. When exercised, each option converts electricity to tokens. We provide a method of pricing mining hardware based on this insight, and prove that any other price creates arbitrage. Our method shows that contrary to the popular belief that mining hardware is worth less if the cryptocurrency is highly volatile, the opposite effect is true: volatility increases value. Thus, if a coin's volatility decreases, some miners may leave, affecting security. We compare the prices produced by our method to prices obtained from popular tools currently used by miners and show that the latter only consider the expected returns from mining, while neglecting to account for the inherent risk in mining, which is due to the high exchange-rate volatility of cryptocurrencies. Finally, we show that the returns made from mining can be imitated by trading in bonds and coins, and create such imitating investment portfolios. Historically, realized revenues of these portfolios have outperformed mining, showing that indeed hardware is mispriced.

cs.CR↗

arXiv2023

The Vulnerable Nature of Decentralized Governance in DeFi

Decentralized Finance (DeFi) platforms are often governed by Decentralized Autonomous Organizations (DAOs) which are implemented via governance protocols. Governance tokens are distributed to users of the platform, granting them voting rights in the platform's governance protocol. Many DeFi platforms have already been subject to attacks resulting in the loss of millions of dollars in user funds. In this paper we show that governance tokens are often not used as intended and may be harmful to the security of DeFi platforms. We show that (1) users often do not use governance tokens to vote, (2) that voting rates are negatively correlated to gas prices, (3) voting is very centralized. We explore vulnerabilities in the design of DeFi platform's governance protocols and analyze different governance attacks, focusing on the transferable nature of voting rights via governance tokens. Following the movement and holdings of governance tokens, we show they are often used to perform a single action and then sold off. We present evidence of DeFi platforms using other platforms' governance protocols to promote their own agenda at the expense of the host platform.

cs.CR↗

arXiv2023

Blockchain Censorship

Permissionless blockchains promise to be resilient against censorship by a single entity. This suggests that deterministic rules, and not third-party actors, are responsible for deciding if a transaction is appended to the blockchain or not. In 2022, the U.S. Office of Foreign Assets Control (OFAC) sanctioned a Bitcoin mixer and an Ethereum application, putting the neutrality of permissionless blockchains to the test. In this paper, we formalize quantify and analyze the security impact of blockchain censorship. We start by defining censorship, followed by a quantitative assessment of current censorship practices. We find that 46% of Ethereum blocks were made by censoring actors that intend to comply with OFAC sanctions, indicating the significant impact of OFAC sanctions on the neutrality of public blockchains. We further uncover that censorship not only impacts neutrality, but also security. We show how after Ethereum's move to Proof-of-Stake (PoS) and adoption of Proposer-Builder Separation (PBS) the inclusion of censored transactions was delayed by an average of 85%. Inclusion delays compromise a transaction's security by, e.g., strengthening a sandwich adversary. Finally we prove a fundamental limitation of PoS and Proof-of-Work (PoW) protocols against censorship resilience.

cs.CR↗