Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash?

Yujin Kwon (KAIST), Hyoungshick Kim (Sungkyunkwan Univ.), Jinwoo Shin (KAIST), Yongdae Kim (KAIST)

Overview

In Aug. 2017, Bitcoin was split into the original Bitcoin (BTC) and Bitcoin Cash (BCH) due to political conflict. Since these coins have compatible proof-of-work (PoW) algorithms, ASIC miners can choose either BTC or BCH mining to increase their profit. Even though the profitability of each coin mining depends on both the coin price and mining difficulty, some miners can immediately switch the coin to mine only when mining difficulty changes because the difficulty changes are more predictable than that for the coin price. We call this behavior fickle mining.

This work aims to analyze fickle mining by proposing a game theoretical framework in which fickle miners and some political factions (e.g. BITMAIN for the BCH system) are considered. In this work, we show that fickle mining can lead to a lack of loyal miners to BCH, and in the worst case, there is no miner in BCH, which implies the complete downfall of BCH. To validate this fact, we traced the actual data and analyzed two events: 1) BTC vs. BCH and 2) "hash war" between Bitcoin ABC and Bitcoin SV. We generalize our analysis into other coin systems with compatible PoW algorithms (e.g. ETH vs. ETC) and give an important message: A major coin can steal the loyal miners from other less valued rivalry coins with a small change.

Fickle mining

Fickle miners may immediately switch their coin only when mining difficulty changes. More specifically, the fickle miners first conduct BTC mining, observing the changes in the mining difficulties of BTC and BCH. Then, if the BCH mining difficulty is low, they immediately shift to BCH mining. When the BCH mining difficulty increases again thanks to its difficulty adjustment algorithm, fickle miners immediately shift to BTC mining. We observe that fickle mining heavily occurred in practice as shown below.

The above figures represent mining power data of two pools, ViaBTC and BTC.com, (Sep. 29, 2017 ∼ Oct. 6, 2017). These two pools support both BTC and BCH mining; miners in the pools can choose either BTC or BCH mining by just clicking one button. In the figure, the grey regions show large movements of mining power from BTC to BCH mining.

Game analysis

We modeled a game considering fickle mining and some political BCH factions (e.g., BITMAIN) that are only concerned with maintaining the BCH system rather than mining profits. In our analysis, a miner can choose either BTC-only mining, BCH-only mining, or fickle mining as its strategy while the BCH factions only conduct BCH mining. Here, note that miners can change their strategy over time.

Then the right side figure represents our game results in the special case where there is no BCH faction sticking to BCH mining (see the paper for details). The x- and y-axes represent fractions of mining power engaging in fickle mining and BCH-only mining, respectively, and k represents a relative BCH price to BTC price. The yellow point indicates an equilibrium representing coexistence of BTC and BCH while the yellow line indicates equilibria where BCH dies because there is no BCH miner (i.e., the value of y is 0). Note that, in the yellow line, only fickle miners who never perform BCH mining after an increase in the BCH mining difficulty exist, and the BCH mining difficulty cannot decrease because there is no BCH-only miner. In addition, all points except for the equilibria moves according to the red arrows.

BTC vs. BCH

We analyze the mining power data in the Bitcoin system from Aug. 1, 2017 to Dec. 10, 2018, to identify to which equilibrium the state has been moving. The below figure represents the movement of a state over time, where a red arrow indicates a movement in agreement with our result while a black arrow indicates a deviation from our theoretical analysis (see our paper for details).

Through the above figures, we can see that most history follows our theoretical result. Here, what we should note is that BCH suffered from a lack of loyal miners before the hard fork presented in Figure (h) in which BCH changed its mining difficulty algorithm on Nov. 13, 2017. Due to the lack of loyal miners to BCH, there was a case where only two accounts generated about 70 % of blocks and there were only five BCH miners. In addition, BCH before Nov. 13, 2017 was susceptible to double spending attacks with only 1∼2% of the total mining power in the Bitcoin system. Fortunately, the hard fork of BCH influenced the status as an external factor, and after that, the state has been close to coexistence like in Figure (i).

Bitcoin ABC vs. Bitcoin SV

Bitcoin ABC Mining power distribution (11/1/18~12/20/18)

Bitcoin SV Mining power distribution (11/15/18~12/20/18)

Moreover, we investigate mining power distribution of Bitcoin ABC and Bitcoin SV over time (see the above figures) to analyze the hash war, which recently happened between them. From the above data, we derive the right side figure, which implies that this war also follows our theoretical analysis.

Generalization: automatic mining

Our game model can be applied for the analysis of automatic mining in which miners automatically choose the most profitable coin to mine. Note that the main difference between fickle mining and automatic mining is that fickle miners immediately change their coin only when the mining difficulty changes while automatic miners can immediately change their coin when not only the mining difficulty but also the coin price changes.

As a result, at the time of this work (Dec. 2018), if 5% of the total mining power of the Bitcoin system involves automatic mining, the current loyal miners for BCH would leave, weakening its security. Finally, we generalize our game into coin systems where compatible PoW algorithms are used. Therefore, our study brings new and important angles in competitive coin markets:

A coin can intentionally weaken the security and decentralization level of the other rival coin when mining hardware is shared between them, allowing for automatic mining.

  • Paper information

Yujin Kwon, Hyoungshick Kim, Jinwoo Shin, and Yongdae Kim, "Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash?", IEEE Symposium on Security and Privacy (S&P), 2019: Full version with proofs, Camera-ready version (TBD)


  • How to cite the paper?
@inproceedings{kwon2019btcvsbch,
title={{Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash?}}, 
author={Kwon, Yujin and Kim, Hyoungshick and Shin, Jinwoo and Kim, Yongdae},
booktitle={2019 IEEE Symposium on Security and Privacy (SP)},
year = {2019},
organization={IEEE}
}


  • Contact

If you have any questions or comments, please don't hesitate to contact the first author Yujin Kwon (dbwls8724@kaist.ac.kr), a PhD student at System Security Lab at KAIST, Korea.