Presentation of our short paper "A Wild Velvet Fork Appears! Inclusive Blockchain Protocol Changes in Practice" at the Bitcoin Workshop of the Financial Cryptography and Data Security conference 2018.

1. A Wild Velvet Fork Appears!
Inclusive Blockchain Protocol Changes in
Practice
A. Zamyatin, N. Stifter,
A. Judmayer, P. Schindler,
E. Weippl and W. J. Knottenbelt
5th Workshop on Bitcoin and Blockchain Research
Financial Cryptography and Data Security 2018
HP
Lv ???Velvet Fork
HP
Lv 511.653Bitcoin

2. Motivation
• Ongoing debate on consensus changes
in permissionless blockchains
• Velvet fork concept recently introduced
• [Kiayias et al.,’17]
• Do Velvet forks exist in practice?
• Existing definition of protocol update
mechanisms don’t fully capture the
concept of a Velvet fork
• [Bonneau et al.,’15]
• [Buterin,‘17]
• [Chepurnoy et al.,‘17]
• [Giechaskiel et al.,’16] https://imgs.xkcd.com/comics/standards.png

3. Soft vs. Hard Forks
• Hard fork
• Descriptor for changes incurring a permanent split of the blockchain
• However:
No majority  No chain split if (assuming econom. rational actors)
• Soft Fork
• Some level of compatibility preserved towards clients adhering to previous
rules
• However
If majority of consensus participants is not upgraded  Permanent split

4. Soft vs. Hard Forks
• Hard fork
• Descriptor for changes incurring a permanent split of the blockchain
• However:
No majority  No chain split (assuming econom. rational actors)
• E.g., a failed 2Mb blocks fork: upgraded miners consider old rules valid and follow the
longer „legacy“ chain. New blocks continously discarded by legacy miners.
• Soft Fork
• Some level of compatibility preserved towards clients adhering to previous rules
• However:
If majority of consensus participants is not upgraded  Permanent split

5. Notation
• Pre-agreed set of protocol rules 𝑷𝑷
• Validity set (𝑽𝑽)
• Set of all blocks valid under rules 𝑷𝑷
• Block 𝒃𝒃 is valid under 𝑷𝑷 iff 𝒃𝒃 ∈ 𝑽𝑽
• Question: how does a protocol change 𝑷𝑷 → 𝑷𝑷𝑷 affect
consensus?
• Changes to validity set denoted as 𝑵𝑵

6. Mechanisms for Consensus Rule Changes

7. Velvet Forks
• Rules applied conditionally
• No majority agreement required
• Never causes a permanent chain split
• Except if conflicting rules introduced by legacy miners

8. Velvet Forks in the Wild
• P2Pool
• Subchains and Weak Blocks
• Merged Mining
• Overlay Protocols and Colored Coins

9. P2Pool
• Decentralized
Mining pool
• Weak/Near blocks
used as pool
„shares“
• Additional structure:
Sharechain
A. Zamyatin, „Merged Mining: Analysis of Effects and Implications“,
MSc Thesis, Vienna University of Technology, 2017

10. Security Implications
• Blocks may no longer have the same (economic) value to
upgraded (velvet) and legacy miners.
• Possible effects on double spending and selfish mining
• [Carlsten et al.,‘16] – Petty compliant miners and better timing of
selfish mining attacks in a block reward free model

14. Security Implications
• Blocks may no longer have the same (economic) value to upgraded
(velvet) and legacy miners.
• Possible effects on double spending and selfish mining
• [Carlsten et al.,‘16] – Petty compliant miners and better timing of selfish
mining attacks in a block reward free model
• Insidious Soft Fork
1) Start as velvet fork
2) Gain adoption
3) Discard legacy blocks / conflicting rules (soft or hard fork)
4) ???
5) Profit?

15. Outlook

16. References
• A. Kiayias, A. Miller, and D. Zindros. Non-interactive proofs of proof-of-work. Cryptology
ePrint Archive, Report 2017/963, 2017
• J. Bonneau, A. Miller, J. Clark, A. Narayanan, J. A. Kroll, and E. W. Felten. Sok: Research
perspectives and challenges for bitcoin and cryptocurrencies. In IEEE Symposium on
Security and Privacy, 2015.
• A. Chepurnoy, T. Duong, L. Fan, and H.-S. Zhou. Twinscoin: A cryptocurrency via proof-of-
work and proof-of-stake. http://eprint.iacr.org/2017/232, 2017
• V. Buterin. Hard forks, soft forks, defaults and coercion.
http://vitalik.ca/general/2017/03/14/forks and markets.html, 2017.
• I. Giechaskiel, C. Cremers, and K. B. Rasmussen. On bitcoin security in the presence of
broken cryptographic primitives. In European Symposium on Research in Computer
Security (ESORICS), September 2016
• M. Carlsten, H. Kalodner, S. M. Weinberg, and A. Narayanan. On the instability of bitcoin
without the block reward. In Proceedings of the 2016 ACM SIGSAC Conference on
Computer and Communications Security, pages 154–167. ACM, 2016.

17. • I. Eyal, A. E. Gencer, E. G. Sirer, and R. van Renesse. Bitcoin-ng: A scalable blockchain
protocol. In 13th USENIX Security Symposium on Networked Systems Design and
Implementation (NSDI’16). USENIX Association, Mar 2016.
• A. E. Gencer, R. van Renesse, and E. G. Sirer. Short paper: Service-oriented sharding for
blockchains. Financial Cryptography and Data Security 2017, 2017.
• J. Lau. [bitcoin-dev] extension block softfork proposal.
https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2017-January/013490.html, 2017.
• C. Jeffrey, J. Poon, F. Indutny, and S. Pair. Extension blocks (draft).
https://github.com/tothemoon-org/extension-blocks/blob/master/spec.md, 2017.
• Bissias, George, and Brian Neil Levine. "Bobtail: A Proof-of-Work Target that Minimizes
Blockchain Mining Variance (Draft)." arXiv preprint arXiv:1709.08750 (2017).
• Y. Sompolinsky and A. Zohar. Secure high-rate transaction processing in bitcoin. In Financial
Cryptography and Data Security, pages 507–527. Springer, 2015

18. A Wild Velvet Fork Appears!
Inclusive Blockchain Protocol Changes in Practice
A. Zamyatin, N. Stifter, A. Judmayer, P. Schindler, E. Weippl and
W. J. Knottenbelt
a.zamyatin@imperial.ac.uk
nstifter@sba-research.org
5th Workshop on Bitcoin and Blockchain Research
Financial Cryptography and Data Security 2018