F2Pool

F2Pool co-founder responds to allegations it’s cheating the Ethereum POW system

The response comes after researchers in Israel alleged the mining pool has been manipulating Ethereum block timestamps to obtain higher mining rewards.

F2Pool co-founder Chun Wang has responded to allegations that his mining pool has been manipulating Ethereum block timestamps to “obtain consistently higher mining rewards.”

The allegations came from an Aug. 5 paper from researchers at The Hebrew University, claiming the mining pool has been engaging in a “consensus-level” attack on Ethereum over the last two years to gain an edge over “honest” miners.

However, Wang on Twitter responded by saying that “we respect the *consensus* as is”, implying that intentionally exploiting the system’s rules doesn’t necessarily mean that rules have been broken.

We respect the *consensus* as is. If you don’t like the consensus, convince @TimBeiko to send me another Announcement and change it. https://t.co/Lmw2INzOzg

— Chun at 78°N (@satofishi) August 8, 2022

Earlier this week, the researchers shared what they claim has been the first proof of a “consensus-level attack” on Ethereum, in which miners such as F2Pool have found a way to manipulate block timestamps to consistently get higher mining rewards compared to mining “honestly.”

The research paper was penned by cryptocurrency lecturer Aviv Yaish, software algorithm developer Gilad Stern, and computer scientist Aviv Zohar, alleging that Ethereum mining pool F2Pool has been one of the miners that have been using this timestamp manipulation strategy.

“Although most mining pools produce relatively inconspicuous-looking blocks, F2Pool blatantly disregards the rules and uses false timestamps for its blocks,” said Yaish, adding that the mining pool has been executing the attack over the last two years.

Wang also appeared to own up to evidence presented by Yaish, suggesting that the timestamp manipulation was being done intentionally.

I can’t stop appreciate this elegant implementation of what we’ve done over the past two years.

I killed $TRC Terracoin as early as 2013 using a similar timestamp manipulation approach by lower the difficulty to virtually zero. A robust system must withstand all kind of tests. https://t.co/z8pLdLtAU0

— Chun at 78°N (@satofishi) August 8, 2022

F2Pool is a geographically distributed mining pool, which mostly mines blocks on the Bitcoin, Ethereum, and Litecoin networks.

How the ‘attack’ works

According to the researchers, Ethereum’s current proof-of-work (POW) consensus laws include a vulnerability that gives miners a “certain degree of freedom” when setting timestamps, which means that false timestamps can be created.

“For example, a miner can start mining a block now, but set the block’s timestamp to actually be 5 seconds in the past, or 10 seconds in the future. As long as this timestamp is within a certain reasonable bound, the block will still be considered valid, according to Ethereum’s consensus laws.”

The ability to create these false timestamps gives these miners an edge in a “tie-breaking” scenario as a miner can replace another miner’s blocks of the same block height by making the timestamp low enough to increase the block’s mining difficulty.

However, the researchers also noted that the vulnerability may be solved after Ethereum transitions to proof-of-stake (POS) after the upcoming Merge on Sept. 19, which utilizes a different set of consensus rules.

“An obvious mitigation technique which will solve both this attack and any other PoW-related one, is to migrate Ethereum’s consensus mechanism to proof-of-stake (PoS).”

“Other solutions which might be smaller in scope and thus easier to implement are to adopt better fork-choosing rules, use reliable timestamps, or avoid using timestamps for difficulty adjustments altogether,” the researchers added.

Bitcoin miner prices will continue to fall, F2Pool exec predicts

The majority of big crypto mining firms have sold their self-mined Bitcoin, while a few firms like Marathon, Hut 8 and Hive still hold on.

The price of cryptocurrency mining hardware is likely to continue falling in the near future amid the ongoing crypto winter, according to an executive at major Bitcoin (BTC) mining pool F2Pool.

Supporting 14.3% of the BTC network, F2Pool is one of the world’s biggest Bitcoin mining pools. On Tuesday, F2Pool released its latest mining industry update.

Focusing on June 2022 BTC mining results, F2Pool’s report noted that the majority of Bitcoin mining companies like Core Scientific have opted to sell their self-mined Bitcoin recently.

Bitfarms, a major Canadian BTC mining firm, sold 3,000 Bitcoin, or almost 50% of its entire BTC stake for $62 million ito reduce its credit facility in June.

“I have studied almost 10 publicly traded industrial miners and found that they are all very honestly telling everyone that they are selling self-mined Bitcoins,” F2Pool’s director of global business development Lisa Liu wrote in the report. She added that the proceeds are used to fund operating expenses and to grow capital, as well as to reduce obligations under equipment and facility loan agreements.

Liu went on to say that only a few publicly traded industrial miners claimed that they would stick with their long-standing HODL strategy. Those included firms like Marathon, Hut 8 and Hive Blockchain Technologies. “In particular, Hive surprisingly does not have significant debt, nor does it have equipment financing for ASIC and GPU equipment,” she added.

The executive also mentioned that the price of application-specific integrated circuit (ASIC) miners has dropped sharply over the past several months. By early June, the price of top and mid-tier ASIC miners reportedly plummeted 70% from their all-time highs in the $10,000–$18,000 range.

At the time of writing, Bitmain’s flagship miner Antminer S19 Pro is selling on Amazon in the $4,000–$7,000 range for used devices. A brand new device apparently still sells for more than $11,000.

ASIC prices will continue to fall even further, which could trigger a lot of new miners to exit mining, Liu predicted, stating:

“I think ASIC prices will continue to fall although they have already dropped rapidly since reaching the peak. If equipment owners cannot secure power and capacity at a competitive price level, a lot of newbies who hopped on the hash train last year are likely to be thrown off.”

Liu stressed that such a situation would be the “worst-case scenario” as F2Pool wishes to see “every miner go through this cold winter.”

As of mid-July, Bitcoin mining revenue dropped nearly 80% over a period of nine months, after reaching an all-time high of $74.4 million in October 2021. The sharp decline triggered a massive drop in the price of graphics processing units, which finally became more affordable after the global pandemic-caused chip shortage.