Uncle Traps: Harvesting Rewards in a Queue-based Ethereum Mining Pool

Mining pools in Proof-of-Work cryptocurrencies allow miners to pool their computational resources as a means of reducing payout variance. In Ethereum, uncle blocks are valid Proof-of-Work solutions which do not become the head of the blockchain, yet yield rewards if later referenced by main chain blocks. Mining pool operators are faced with the non-trivial task of fairly distributing rewards for both block types among pool participants. Inspired by empirical observations, we formally reconstruct a Sybil attack exploiting the uncle block distribution policy in a queue-based mining pool. To ensure fairness of the queue-based payout scheme, we propose a mitigation. We examine the effectiveness of the attack strategy under the current and the proposed policy via a discrete-event simulation. Our findings show that the observed attack can indeed be obviated by altering the current reward scheme.