November 5, 2013 - A flaw in the design of bitcoin could enable a minority group of 'selfish miners' to band together and grab more than their fair share of the virtual currency, claim researchers from Cornell University.

In their paper 'majority is not enough: bitcoin mining is vulnerable', Ittay Eyal and Emin Gun Sirer warn that the entire bitcoin ecosystem is open to manipulation and takeover by a group seeking to maximise its reward, and that if this happens the entire currency could collapse.

Bitcoins are mined by networks of computers which have to solve cryptographic puzzles to create 'blocks', which are added to the 'blockchain' - a public ledger recording transactions.

Because solving the puzzles is hard work and therefore costs participants in power consumption, miners are compensated in bitcoins. Miners often band together to pool their computational power, sharing revenues whenever they find blocks.

The Cornell researchers say that the flaw at the centre of the process is that the bitcoin protocol assumes that miners are acting benignly - quickly and honestly sharing the blocks that they discover.

The pair say that if miners act selfishly and only tell the other members in their pool about block discoveries, the rest of the miners will waste their resources on blocks that are ultimately not part of the blockchain. Once enough blocks have been earned by the selfish miners they can publish their "private" chain, meaning that the honest miners' work is discarded.

If a pool of selfish miners is big enough - 33% of the computational power working on bitcoin generation - it will always be able to game the system. If this happens: "Higher revenues can lead new rational miners to join selfish miner pools, leading to a collapse of the decentralised currency," warns the paper.