Pool Strategies Selection in PoW-Based Blockchain Networks: Game-Theoretic Analysis

In proof-of-work-based (PoW-based) blockchain networks, the miners participate in a crypto-puzzle solving competition to win the reward by publishing a new block. Open mining pools attract a large number of miners for solving difficult problems together. Although the open strategy is likely to be more efficient, it makes pools susceptible to attack at the same time. In this paper, we present a game-theoretic analysis of mining pool strategy selection in order to explore the trade-off between the efficiency of openness and the vulnerability of attacks in a PoW-based blockchain network. We first model the pool mining process as a two-stage game, wherein the pools might decide whether to open or not and to attack or not. Based on the two-stage game model, we analyze the Nash equilibrium and the evolutionary stability of the mining games among pools, which uncovers the pool selection dynamics of PoW-based blockchain networks. In particular, we find that the attack behavior is the norm for a weak pool and triggers lower expected utilities when punishing the attacks more severely. Numerical simulations also support our theoretical findings as well as demonstrate the stability of the pools' strategy selection.