Analysis of NEST Oracle Machine Facing Mining Pool Refusal to Package Attack

The NEST distributed Oracle Machine system aims to improve the reliability of the Oracle Machine output data and the security of the system by allowing more on-chain users to participate in the price conversion process. However, this distributed characteristic also brings new challenges, one of which is that malicious miners may provide false quotes that affect the price.

To address this issue, NEST has designed a validation mechanism for quoting and order eating. Validators can trade based on the quote to obtain the collateral assets of the quote provider and propose new quotes for correction. This mechanism limits malicious quoting to some extent and can timely correct improper quotes.

However, the effective operation of this mechanism is based on the timely appearance of single transactions and new quotes in the new blocks on the chain. However, with the emergence of Mining Pools, individual miners no longer work alone. To stabilize their earnings, miners form Mining Pools to consolidate their computing power, as under the PoW consensus, greater computing power means a higher probability of earning rewards.

The emergence of Mining Pools essentially leads to a monopoly on transaction packaging rights. In public chains, only the miners or Mining Pools that mine blocks can decide which transactions are included in the next block. Large Mining Pools often possess overwhelming computational power advantages and may choose to package transactions that are beneficial to themselves or have higher fees, even if those transactions were not the first to be published on the chain.

When this situation occurs in the NEST Oracle Machine, it may cause newly submitted quotes to not be timely verified within the verification period, ultimately resulting in the NEST outputting incorrect price data. Some Mining Pools may exploit this vulnerability to gain arbitrage opportunities, thereby threatening the security of the entire DeFi ecosystem.

The attack process is roughly as follows:

1. Malicious Mining Pools accumulate cryptocurrencies for arbitrage in advance through methods such as flash loans.

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

3. During the verification period, other validators will propose arbitrage trades and adjust their quotes to obtain profits.

4. Malicious Mining Pools leverage their computational power advantage to refuse to package these correction transactions.

5. If the correction is successfully prevented, malicious Mining Pools can arbitrage based on erroneous quotes.

This type of attack is essentially a multi-party game process. Each Mining Pool needs to weigh the benefits of whether to correct the quoted price. Immediate correction can yield certain profits, but if not corrected, there may be greater arbitrage potential once the quote takes effect. The Mining Pool will ultimately make a choice based on its own hash power proportion and potential profit ratio.

This issue is not only a challenge faced by the NEST Oracle Machine, but the entire decentralization concept of blockchain is impacted by the phenomenon of Mining Pools. Effectively addressing the problems brought about by Mining Pools is an unavoidable and important topic on the path of blockchain technology towards true decentralization.