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NEST Oracle Machine Faces Risk Analysis of Mining Pool Rejection Packaging Attack
Analysis of Mining Pool Refusal to Package Attacks Faced by NEST Oracle Machine
The NEST distributed Oracle Machine aims to enhance the reliability of the Oracle Machine output data and the security of the system by allowing numerous on-chain users to participate in the determination process of price conversion relationships. To address potential issues with malicious quotes, NEST has designed a quote-eat order submission verification mechanism, allowing validators to trade based on quotes and propose new correction quotes.
However, the effective operation of this price correction mechanism relies on the timely appearance of market orders and new quotes in the new blocks on the chain. With the rise of Mining Pools, their monopoly on transaction packaging rights may threaten the normal operation of this mechanism. Large Mining Pools typically prioritize packaging transactions that are favorable to themselves or have higher fees, even if these transactions are not the first to be published on the chain.
When this situation occurs in the NEST Oracle Machine, it may result in new quotes not being verified in a timely manner during the verification period, ultimately leading to NEST outputting incorrect price data. This creates arbitrage opportunities for certain Mining Pools, thereby threatening the security of the entire DeFi ecosystem.
The attack process is roughly as follows:
Malicious mining pools preemptively hoard cryptocurrencies for arbitrage through methods such as flash loans.
Make a quote to NEST that differs greatly from the actual market price.
During the verification period, other Mining Pools face the decision of whether to amend the offer.
Each Mining Pool engages in a game based on its own hash rate proportion and potential earnings to decide whether to package and correct transactions.
If enough Mining Pools choose not to package corrected transactions, erroneous quotes may be confirmed, creating arbitrage opportunities.
This attack utilizes the concept of Nash equilibrium in game theory. Each Mining Pool weighs the immediate gains from correcting the quote (a) against the potential higher gains from arbitraging after waiting for the erroneous quote confirmation (b). The decision of the Mining Pool depends on its hash rate share, the ratio of a and b, and the possible actions of other Mining Pools.
This issue not only affects the NEST Oracle Machine, but also reflects the challenge of mining pool centralization to the entire blockchain decentralization concept. How to effectively address the problems brought by mining pools while maintaining decentralization is an important topic that must be faced in the development of blockchain technology.