Discounted Selfish Mining : Is It Profitable?

A rational miner may gain from withholding blocks and strategically timing the release to orphan the others' blocks, which questions the existence of honest majority and blockchain concensus. This paper reconciles the discrepancy between the absence of block-withholding attacks in practice and the profits as suggested by the literature. When the miner is impatient, selfish mining is a long-term deviation, and the short-term frictions incentivize honest mining. We present a continuous-time model that incorporates discounted cash flows, a new risk of being temporarily orphaned and endogenous difficulty adjustment. We show that, the gain from selfish mining relies on a quick difficulty adjustment, and the miner is most concerned with maintaining the new difficulty in long run. A small risk would increase the threshold computation power to attack by 36%. A protocol that includes the orphan blocks in difficulty recalculation defenses such attacks