What happens if pools try to maximize fees by congesting the network?

[BlackHatCoiner]

Honestly, I had never thought about this before, or at least I don't remember thinking about it.

Say that Foundry USA, AntPool and F2Pool (which in total hold about 69% of the hash rate according to btc.com) cooperated to pretend there's network congestion, when there isn't. For example, say the median fee is 1 sat/vb. But, they don't like that, so they broadcast a thousand transactions paying 5-10 sat/vb, to encourage some of the users with 1 sat/vb to raise their fee rate. Pools' transactions don't cost them anything, because they don't include them into their candidate blocks. They just take advantage of the wallet software there exists which tells the user to pay more to have priority.

This isn't limited to when there isn't congestion. Pools could do this right now with Ordinals, and broadcast transactions with 100 sat/vb; that would encourage those paying 50 sat/vb to raise fees. To avoid other pools from including their transactions (and pay 100 sat/vb which is pretty high), they could sometime include a transaction that invalidates their attractive transactions (e.g., spends an UTXO from those).

A problem, from the pool owners' side, is that they can get caught easily for doing it. Every person running a full node will notice unreasonable activity (the miner not including tx that pay much), and blocks mined by pools are known.

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[hatshepsut93]

It's unlikely that all pools and solo miners can form a cartel to launch such attack, and if there's a minority who isn't a part of it, they will mine those fake high fee transactions, causing a loss. If there's a conspiracy to actually include them in block and return the fee to themselves, they still will lose those fees to miners who are not part of the attack, plus they will miss out on the fees from real transactions.

I'm not going to completely dismiss the idea of fee manipulation, but if it's possible, it's likely very hard on practice and there's a lot of factors involved.

[BlackHatCoiner]

It's unlikely that all pools and solo miners can form a cartel to launch such attack

It's very unlikely, and against the game theory. But you don't need everyone. You just need a couple of pools, and an organized approach.

If there's a conspiracy to actually include them in block and return the fee to themselves, they still will lose those fees to miners who are not part of the attack, plus they will miss out on the fees from real transactions.

Sounds to me only sustainable to a coordinated majority. Minorities can't survive this, because big pools will quickly earn their good-paying transactions.

I'm not going to completely dismiss the idea of fee manipulation, but if it's possible, it's likely very hard on practice and there's a lot of factors involved.

Maybe it's just not worth the risk of discrediting the top pools' integrity.

[DannyHamilton]

. . . about 69% of the hash rate . . . broadcast a thousand transactions paying 5-10 sat/vb . . . Pools' transactions don't cost them anything, because they don't include them into their candidate blocks . . .

Wouldn't the remaining 31% of the hash rate include those 10 sat/vb transactions in their blocks?  Wouldn't that mean that these pools would be sending their revenue to their competitors?  That doesn't sone like a good way to stay in business.

Furthermore, can Foundry, Antpool, and F2Pool really trust each other?  Isn't there a pretty strong chance that one of the pools will agree to participate with the others in broadcasting these high-value transactions, and then not actually send the transactions, but instead mine a bunch of the transactions that the other 2 send, allowing them to take a whole bunch of revenue from them?

[BlackHatCoiner]

Wouldn't the remaining 31% of the hash rate include those 10 sat/vb transactions in their blocks?

They'd have less chance than the 69%. Also, the 69% could invalidate them at any time, and at a very low cost, just by making sure they use CPFP. For instance, a 10kb transaction paying 100 sat/vb, requires only a small transaction spending the parent, and invaliding the 10kb one.

Furthermore, can Foundry, Antpool, and F2Pool really trust each other?

That's open for debate, but I don't expect a decentralized network to rely on mutual decisions made by three for-profit organizations. Eventually, there may be benefits outweighing the principles.

[panganib999]

It's unlikely that all pools and solo miners can form a cartel to launch such attack, and if there's a minority who isn't a part of it, they will mine those fake high fee transactions, causing a loss. If there's a conspiracy to actually include them in block and return the fee to themselves, they still will lose those fees to miners who are not part of the attack, plus they will miss out on the fees from real transactions.

I'm not going to completely dismiss the idea of fee manipulation, but if it's possible, it's likely very hard on practice and there's a lot of factors involved.

It's not about if it's unlikely, because it is definitely unlikely but we all know fully well that pools and miners could do this coordinated attack if they so please. It's all about what would happen, as OP asks in his main post.

Now to answer OP's question. With Network Congestion comes people who would wait for the network to be less congested so they could carry out their transaction, sure they don't count for the mass majority but in a large-scale maneuver like this one, they'd be a great clincher. I'd say that when they do decide to congest the network so much that you'd have to pay 10x the usual price you pay for transactions, millions of cryptocurrency users in the world will mutiny, will not create any transaction for let's say, the next two weeks or so, or would boycott the usage of what they assume were the reasons for this fee increase and transaction delay. Utter chaos will commence within the industry, which will only lead to the general public getting whatever they want.

[countryfree]

I guess big pools could team up to do that, but the question is for how long. This is not something that would go unnoticed. Many people (well, people smarter than me) would see that there are thousands of bogus transactions coming from that pool, and they would ask difficult questions to pool owners... Many people would react, and i can't imagine this lasting long...

Besides, there's been congestions before, and within 24 hours, everything was back to normal.

[franky1]

Honestly, I had never thought about this before, or at least I don't remember thinking about it.

Say that Foundry USA, AntPool and F2Pool (which in total hold about 69% of the hash rate according to btc.com) cooperated to pretend there's network congestion, when there isn't. For example, say the median fee is 1 sat/vb. But, they don't like that, so they broadcast a thousand transactions paying 5-10 sat/vb, to encourage some of the users with 1 sat/vb to raise their fee rate. Pools' transactions don't cost them anything, because they don't include them into their candidate blocks. They just take advantage of the wallet software there exists which tells the user to pay more to have priority.

This isn't limited to when there isn't congestion. Pools could do this right now with Ordinals, and broadcast transactions with 100 sat/vb; that would encourage those paying 50 sat/vb to raise fees. To avoid other pools from including their transactions (and pay 100 sat/vb which is pretty high), they could sometime include a transaction that invalidates their attractive transactions (e.g., spends an UTXO from those).

A problem, from the pool owners' side, is that they can get caught easily for doing it. Every person running a full node will notice unreasonable activity (the miner not including tx that pay much), and blocks mined by pools are known.

firstly..
pools dont need to broadcast unconfirmed tx to a network but then not include them in their own block template.. you have it the wrong way around

a productive method of fee mania is the opposite.. its to not broadcast unconfirmed transactions to the network. so that other pools dont add an attacker pools tx to their block.. but only include high fee tx in their own blocktemplate.. that way the transactions dont end up in a competitors block and only be in the creators block thus whatever fee the pool puts into its own transaction it gets back . thus no loss no cost.

if you did do things your way to broadcast unconfirmed to network but refuse to put your own transactions into your own block template.. then you wont get your fees back and you instead would pay some other pool when they include your transactions in their block. thus cost you alot to do it for "thousands of transactions"

secondly pools dont need to use ordinals to set high fee rates. pools can just put their own transactions into their own blocks (not relayed before block solve.
there is no need for ordinals at all to be used for fee mania..

the only purpose of ordinals is data bloat by putting in stupid 3.96mb meme images to stop normal users transactions from fitting into blockspace because its used up

lastly.. many fee estimators base it on a recent set of confirmed blocks fee amounts. so its more about the fee of the last few blocks. rather than whatever transactions are being relayed around which you hope will never get into a block.
so again if you want to cause a fee mania you have to put transactions with high fees into a block

[PX-Z]

That' s a huge resources needed to that, i mean money, yes <10 sat/vb is too low but the sum of it sending in every block sounds a suicide to me. Besides the remaining pools will also gain to that move. Business wise, that is a waste of money without having assurance that their pool will get the mining reward.

[Tytanowy Janusz]

in the short term, anything is possible. In the long term, only what is profitable is possible. if a pool starts to mess with transactions and its return on the provided computing power from miners starts to decrease, individual miners will start to move to the competition. the same will be done by miners who will not want to take part in the attack.

if tx cost pumps, the network will start to produce fewer transactions (because users will start delaying transfers or using altcoins to transfer value) and thus sooner or later most of the transactions mined by the network will be transactions generated and paid for by the attacker. and it doesn't matter if the miner will mine up his spam transactions and the fee will come back to him (cost 0) or someone else's on which he earns (profit) and his spam transactions will be mined by another miner (loss) it's  net zero.

net zero when it comes to revenue and a great loss, when you add the costs of running the ming rig to the calculations  (electricity and equipment depreciation)

[un_rank]

They'd have less chance than the 69%. Also, the 69% could invalidate them at any time, and at a very low cost, just by making sure they use CPFP. For instance, a 10kb transaction paying 100 sat/vb, requires only a small transaction spending the parent, and invaliding the 10kb one.

Correct me if I'm wrong, but CPFP does not invalidate the parent transaction, it bumps up the fee for confirmation by a miner who wants the cumulative fees of both transactions.
How can one then use the child transaction to invalidate the parent?

- Jay -

[BlackHatCoiner]

CFNP

What's this? Closed For New Participants? 

How can one then use the child transaction to invalidate the parent?

Both parent and child transactions are unconfirmed, and the high-paying one is the child, so to invalidate the big one, you only need to double-spend the parent. So, you could pretend the mempool is clogged up, but you'd only need to mine one small transaction for invalidating every big child transaction.

[un_rank]

CFNP

What's this? Closed For New Participants?  

Blurry eyes.

Both parent and child transactions are unconfirmed, and the high-paying one is the child, so to invalidate the big one, you only need to double-spend the parent. So, you could pretend the mempool is clogged up, but you'd only need to mine one small transaction for invalidating every big child transaction.

I still do not get it; you are saying one can invalidate the parent transaction by mining the smaller (in size) child transaction? But to mine the child transaction you do have to confirm the parent transaction as well, that is not invalidating.
Double spending and CPFP are different things.

- Jay -

[franky1]

by doing the unconfirmed mess with mempool game.. does not cause fee congestion.
the games of cancelling out transactions before the 31% get to add them just makes blackhatcoiners whole game just a temporary distraction none event of a few minutes if seeing a transaction clump in mempool.. then not.

this playing with mempool and cancelling transactions does not cause any fee mania

the real method to cause fee mania is if the majority pools did include high fee transactions into their own blocks but not pre-relay those transactions to others before their block is solved. that way it costs them nothing but ramps up the fee statistics for other users to need to pay more to tempt a pool to accept them

as for blackhats other scenario vector of using CPFP to swap transactions around at unconfirmed status. again. a temporary none event of messing with mempool that lasts only a few minutes

...
it really would have helped blackhat if he spent the last few years learning how bitcoin works instead of trusting his buddy about how features are explained to him

messing with unconfirmed mempool is just small temporary non event that does not result in high fee confirmations. especially if blackhat is trying to avoid having high fee transactions confirmed in a attacker majority pools scheme. which in of itself would be some basic self enlighting answer to his own question about confirmed fees
yep not including high fees in your own block results in no high fees seen in the blockchain

messing with unconfirmed transactions to cancel high fees before confirmation also makes no high fees appear in the blockchain

and broadcasting unconfirmed high fee's to other pools giving them a chance for the minority pools to add them(in a scenario of not cancelling the high fee/high size transaction). just means the attacker pool(majority) loses value by paying its competitor(minority). which wont be sustainable, so again not going to cause a long term viable fee mania game
so again if blackhat broadcasts unconfirmed transactions and then cancels them to prevent competitor pools adding it. would mean it only sits in a mempool for a few seconds thus causes no fee drama.

[Wind_FURY]

Wouldn't the remaining 31% of the hash rate include those 10 sat/vb transactions in their blocks?

They'd have less chance than the 69%. Also, the 69% could invalidate them at any time, and at a very low cost, just by making sure they use CPFP. For instance, a 10kb transaction paying 100 sat/vb, requires only a small transaction spending the parent, and invaliding the 10kb one.

I think that even if collusion to engineer a congestion was technically possible, how does that play out in those pool's long term expectation to get incentivized? Such a thing cannot be hidden forever, and the discovery of collusion/dishonesty would make the participants lose confidence in the system, which would probably also make them leave and cause a price crash.

From a game theory point of view, it's better for the pools to do what's best for themselves, but also act honestly and do what's best for the rest of network.

[franky1]

I think that even if collusion to engineer a congestion was technically possible, how does that play out in those pool's long term expectation to get incentivized? Such a thing cannot be hidden forever, and the discovery of collusion/dishonesty would make the participants lose confidence in the system, which would probably also make them leave and cause a price crash.

From a game theory point of view, it's better for the pools to do what's best for themselves, but also act honestly and do what's best for the rest of network.

because when pools force thousands of users to pay more. the pools can ramp down their own high fee tx's to themselves and and instead let high fee users fill the gap. thus making the users then persist the fee mania

EG
imagine the next 18 blocks are transactions of high fee's of pools sending transactions to themselves in their own block templates thus paying the fees back to themselves.. causing fees to show as 60sat/byte minimum.. without costiong the pools anything..

then users will see a 60sat/byte minimum for last 3 hours and so realise if they want to get a tx to confirm within 3 hours(3x(6blocks/hour)=18) then they need to pay that minimum

then when the pools see normal users paying 60sat/byte minimum they allow those transactions in and not include one of their own. ramping fown their own tx involvement becasue now the users tx start to persist the attack for them.. thus they continue letting in users transactions as long as users pay 60sat/byte min

again by pools not zero-confirm relaying their own tx and only including them in their own block template. it stops competing pools stealing their fee's and thus costs the attacker pools nothing to do this, with just a 3 hour of no external fee income until they can push the fee estimates up to the min amount for users to then pay the pools this higher fee consistantly

[smile1218]

If pool try to maximize fees by congesting the network it can lead to slower transaction times and higher transaction fees for all users. This is because when there are more transactions being processed at once, the network can become congested and the miners may prioritize transactions with higher fees. As a result, users who are willing to pay higher fees may have to wait longer for their transactions to be processed. This can lead to a less efficient network overall, as more resources are required to process a larger number of transactions. This could make using the network more expensive and less accessible for everyday users. While pools may incentivize to maximize fees in the short term it is not a sustainable strategy for the long term health and growth of the network.

[ABCbits]

Say that Foundry USA, AntPool and F2Pool (which in total hold about 69% of the hash rate according to btc.com) cooperated to pretend there's network congestion, when there isn't. For example, say the median fee is 1 sat/vb. But, they don't like that, so they broadcast a thousand transactions paying 5-10 sat/vb, to encourage some of the users with 1 sat/vb to raise their fee rate. Pools' transactions don't cost them anything, because they don't include them into their candidate blocks. They just take advantage of the wallet software there exists which tells the user to pay more to have priority.

If those pools doesn't include TX with high fee rate (which created by themselves) on their block, wouldn't people find it as odd/unusual behavior? For example, mempool.space have block audit[1] and block health[2] feature which can be used to check such behavior easily.

Wouldn't the remaining 31% of the hash rate include those 10 sat/vb transactions in their blocks?

They'd have less chance than the 69%. Also, the 69% could invalidate them at any time, and at a very low cost, just by making sure they use CPFP. For instance, a 10kb transaction paying 100 sat/vb, requires only a small transaction spending the parent, and invaliding the 10kb one.

Another question, when or how should they decide to invalidate their transaction?

[1] https://mempool.space/docs/faq#how-do-block-audits-work
[2] https://mempool.space/docs/faq#what-is-block-health

[BlackHatCoiner]

I still do not get it; you are saying one can invalidate the parent transaction by mining the smaller (in size) child transaction? But to mine the child transaction you do have to confirm the parent transaction as well

No, I mean the opposite. The child is the big transaction, and the parent is just an unconfirmed one. You can invalidate the big transaction, by double-spending the parent.

because when pools force thousands of users to pay more

How can a pool force you to pay more?

Another question, when or how should they decide to invalidate their transaction?

As I said, by invalidating the parent, it's trivial to pretend there's bulk of high-paying child transactions, with minimum cost. When you should do it, is another thing to discuss. I don't know.

[franky1]

because when pools force thousands of users to pay more

How can a pool force you to pay more?

the obvious way. by pools not including your transaction unless your fee meets their desired minimum..
isnt this the whole point of your topic. trying to think of ways to cause fee mania again.. via pools

seems you dont know the basics of most things. because you think its a users mempool that does transaction selections for blocks. maybe you need to realise its actually pools that select the transactions that go into blocks. not users nodes.

but i did find it funny how your scenario in this topic is you trying to mess TEMPORARILY with users mempool of zero-confirm transactions and cancelling them before they get into a block. thus have nothing to do with fees of transaction that pools select of what they want to see in a block.. you know, blocks.. you know the block data where real estimate of priority are found.. you know blocks created by pools.. (or maybe you dont know these things)

but anyway you have much to learn so ill give you a break and give you some time to learn. try not to waste it on social drama. and instead actually learn some stuff