On Profitability of Nakamoto double spend
This addresses security and efficiency issues for Bitcoin users and developers by providing a more practical and lower confirmation requirement to prevent profitable double spend attacks, representing an incremental improvement over existing analyses.
The paper tackles the problem of Nakamoto double spend strategies in Bitcoin, showing that the original strategy is not profitable, and proposes a modified strategy with a stopping threshold to compute exact profitability and minimal confirmations needed to deter attacks, finding that only 1 or 2 confirmations are sufficient for average transactions with small attacker hashrate, compared to higher numbers based on success probability.
Nakamoto double spend strategy, described in Bitcoin foundational article, leads to total ruin with positive probability and does not make sense from the profitability point of view. The simplest strategy that can be profitable incorporates a stopping threshold when success is unlikely. We solve and compute the exact profitability for this strategy. We compute the minimal amount of the double spend that is profitable. For a given amount of the transaction, we determine the minimal number of confirmations to be requested by the recipient such that this double spend strategy is non-profitable. We find that this number of confirmations is only 1 or 2 for average transactions and a small hashrate of the attacker. This is substantially lower than the original Nakamoto numbers that are widely used and are only based on the success probability instead of the profitability.