Paper 2020/1098

Formalizing Bitcoin Crashes with Universally Composable Security

Junming Ke, Pawel Szalachowski, Jianying Zhou, and Qiuliang Xu

Abstract

Bitcoin has introduced an open and decentralized consensus mechanism which in combination with an append-only ledger allows building so-called blockchain systems, often instantiated as permissionless cryptocurrencies. Bitcoin is surprisingly successful and its market capitalization has reached about 168 billion USD as of July 2020. Due to its high economic value, it became a lucrative target and the growing community has discovered various attacks, proposed promising improvements, and introduced contingency plans for handling catastrophic failures. Nonetheless, existing analysis and contingency plans are not formalized and are tailored only to handle a small specific subset of diverse attacks, and as such, they cannot resist unexpected emergency cases and it is hard to reason about their effectiveness and impact on the system. In this work, we provide a formalized framework to help evaluate a variety of attacks and their mitigations. The framework is based upon the universal composability (UC) framework to describe the attacker's power and the system's security goals. We propose the system in the context of Bitcoin and to the best of our knowledge, no similar work has been proposed previously. Besides, we demonstrate and evaluate our model with different case studies from the real world. Finally, we signal remaining challenges for the contingency plans and their formalization.