Challenges Faced by NEST Distributed Oracle Machine: Analysis of Mining Pool Refusal to Package Attacks

1. Introduction

The NEST distributed Oracle Machine aims to improve data reliability and system security through extensive on-chain user participation. To address potential malicious bidding issues, NEST has designed a bidding-taking order verification mechanism that allows validators to trade based on bids and propose corrections. However, the effective operation of this mechanism relies on taking order trades and new bids being timely reflected in new blocks on the chain.

With the emergence of Mining Pools, there has been a trend of monopoly in transaction packaging rights. Large Mining Pools tend to choose to package transactions that are beneficial to themselves or have higher fees, which may lead to the new quotations from the NEST Oracle Machine not being verified in a timely manner, ultimately outputting incorrect price data, creating arbitrage opportunities for certain Mining Pools and threatening the security of the DeFi ecosystem.

2. Attack Process and Analysis

Assuming that all members participating in mining are Mining Pools with different hash rate shares, and are aware of each other's hash rate situation. The attack process is as follows:

1. Malicious mining pools pre-stock cryptocurrencies for arbitrage.

2. Submit a quote to NEST that has a significant difference from the actual market price.

3. During the verification period, other mining pools face the choice of whether to package the corrective transaction.

4. Each Mining Pool makes decisions based on a complete information static game model.

Decision considerations involve two types of returns:

• Adjusted Quote: Pia(P for Mining Pool hash rate share, a for adjusted yield )
• Unadjusted Quote: Pib * Pn(b is the final arbitrage profit, Pn is the probability that the quote has not been adjusted ).

Mining Pools choose whether to adjust the quote based on the proportion of computing power and the return ratio, ultimately reaching Nash equilibrium.

3. Analysis Summary

Mining pools may utilize their computational power advantage to delay or obstruct price corrections, arbitraging from the NEST Oracle Machine. This is not only a challenge faced by NEST but also reflects the impact of mining pool centralization on the entire blockchain decentralization concept. Addressing the issues brought by mining pools is one of the important challenges to achieve true decentralization.