Incentivizing Blockchain Forks via Whale Transactions

Bitcoin’s core innovation is its solution to double-spending, called Nakamoto consensus. This mechanism provides a probabilistic guarantee that transactions will not be reversed once they are sufficiently deep in the blockchain, assuming an attacker controls a bounded fraction of mining power in the network. We show, however, that when miners are rational this guarantee can be undermined by a whale attack in which an attacker issues an off-theblockchain whale transaction with an anomalously large transaction fee in an effort to convince miners to fork the current chain. We carry out a game-theoretic analysis and simulation of this attack, and show conditions under which it yields an expected positive payoff for the attacker.