New paper recently accepted at FC2022: Suborn Channels: Incentives Against Timelock Bribes

As the Bitcoin mining landscape becomes more competitive, analyzing potential attacks under the assumption of rational miners becomes increasingly relevant. In the rational setting, blockchain users can bribe miners to reap an unfair benefit. Established protocols such as Duplex Micropayment Channels and Lightning Channels are susceptible to bribery, which upends their financial guarantees. Indeed, we prove that in a two- party contract in which the honest party can spend an output right away, whereas the malicious can only spend the same output after a timelock, the latter party can promise a high fee to the miners, who then intentionally ignore the transaction of the honest party in anticipation of the higher fee. This effectively prevents a valid transaction from ever entering the blockchain, resulting in potentially severe financial losses for the honest and considerable gains for the malicious party.

We expand previous results on timelock bribes to more realistic blockchains, proving that a general class of contracts are susceptible. We then apply our results to Duplex Micropayment Channels and Lightning Channels, providing exact bounds on their safe operating region. Furthermore, we enhance the Bitcoin Script of Duplex Micropayment Channels so that the coins of a party that attempts to bribe are given to the miners as fees, therefore effectively disincentivizing bribes. Our solution, named Suborn channels, is implemented as a proof-of-concept. We also propose a small change to Lightning Channels that achieves a similar effect. Moreover, we formally express the exact circumstances under which our two proposals ensure alignment of miner incentives with the prescribed protocol outcome.