Analysis of Mining Pool Refusal to Package Attack Faced by NEST Oracle Machine

The NEST distributed Oracle Machine aims to enhance the reliability of price data and the security of the system by allowing more on-chain users to participate in the price determination process. To prevent malicious quoting, NEST has designed a quoting-eating order verification mechanism that allows verifiers to trade based on the quote and propose corrections.

However, the effectiveness of this mechanism relies on the timely appearance of market orders and new quote trades in new blocks. With the emergence of Mining Pools, the monopoly on transaction packaging rights has become a potential issue. Large Mining Pools may selectively package transactions that are beneficial to themselves or have higher fees, rather than the transactions that are broadcasted first.

This situation may cause the NEST Oracle Machine to be unable to verify new quotes in a timely manner, ultimately resulting in erroneous price data. Certain Mining Pools may take advantage of this opportunity for arbitrage, threatening the security of the entire DeFi ecosystem.

The attack process is roughly as follows:

1. Malicious Mining Pool pre-stocks cryptocurrency for arbitrage.

2. Submit a quote to NEST that differs significantly from the actual market price.

3. During the verification period, other Mining Pools face the choice of whether to package the corrected transaction.

4. Each Mining Pool makes game-theoretic decisions based on its own computing power and potential earnings.

5. If enough Mining Pools choose not to package corrected transactions, erroneous quotes may be confirmed.

6. Malicious mining pools exploit erroneous prices for arbitrage.

This attack utilizes the concept of Nash equilibrium in game theory. Each Mining Pool will weigh the benefits of immediately correcting the quote (a) against the benefits of waiting for the incorrect quote to be confirmed and then arbitraging (b). Typically, b > a, but the probability of obtaining the benefit is proportional to the Mining Pool's hash power.

Ultimately, the Mining Pool will make decisions based on its own computing power ratio and the proportional relationship between the two types of income. This phenomenon not only affects the NEST Oracle Machine but also poses a challenge to the entire decentralized concept of blockchain.

How to effectively solve the problems caused by the centralization of Mining Pools is an unavoidable important topic in the process of blockchain moving towards true decentralization.