Analysis of Mining Pool Refusal to Package Attack Facing NEST Oracle Machine

The NEST distributed Oracle Machine aims to enhance the reliability of price data and the security of the system through extensive on-chain user participation. To address potential malicious quoting, NEST has designed a quoting-eating order verification mechanism that allows validators to trade based on quotes and propose corrections.

However, the effective operation of this mechanism relies on the timely appearance of order-eating and new quoted transactions in new blocks. With the emergence of Mining Pools, the rights to package transactions tend to be monopolized. Large mining pools often prioritize packaging transactions that are favorable to themselves or have higher fees, even if these transactions are not the first to be posted on the chain.

When this situation occurs in the NEST Oracle Machine, it may lead to new quotes not being verified in a timely manner during the verification period, ultimately resulting in the NEST outputting incorrect price data. Certain Mining Pools may take this opportunity to capture arbitrage, threatening the security of the entire DeFi ecosystem.

Attack Process Analysis

Assuming that all members participating in mining are different Mining Pools with varying hash power ratios, and they are aware of each other's hash power situations.

1. Preparation before the attack: Malicious Mining Pools pre-stock cryptocurrencies for arbitrage through methods such as flash loans.

2. Submitting Malicious Quotes: Malicious Mining Pools submit a quote to NEST that significantly differs from the actual market price.

3. Verification Period Game: During the verification period, all mining pools face the decision of whether to package corrected quoted transactions. This is essentially a multi-stage independent complete information static game process.

4. Revenue Analysis:

   • Choose to adjust the quote: immediately gain profit a, but the probability is proportional to the Mining Pool computing power.
   • No correction on the quote: potential for higher arbitrage profits, but must wait for the quote to be established.

5. Decision-making trade-off: The Mining Pool weighs whether to adjust the quote based on factors such as its own hash power ratio, revenue ratio a/b, etc., ultimately reaching a Nash equilibrium state.

Summary

Mining Pools may delay or hinder the update of price corrections due to their computational power advantages, thereby utilizing the NEST Oracle Machine for arbitrage. This is not only a challenge faced by the NEST Oracle Machine, but also an issue confronting the entire decentralized philosophy of blockchain. Effectively addressing the problems brought by Mining Pools is an important topic in achieving true decentralization.