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Abstract

The authors laid the groundwork for analyzing the crypto-economic incentives of interconnected blockchain networks and utilize situational crime prevention theory to explain how more secure systems can be developed. Blockchain networks utilize smaller blockchains (often called sidechains) to increase throughput in larger networks. Identified are several disadvantages to using sidechains that create critical exposures to the assets locked on them. Without security being provided by the mainchain in the form of validated exits, sidechains or statechannels which have a bridge or mainchain asset representations are at significant risk of attack. The inability to have a sufficiently high cost to attack the sidechain while mainchain assets can be withdrawn, along with the disconnect between the integrity of the sidechain and the value of the stolen assets are among the top disadvantages. The current study used a vulnerability analysis and theoretical mathematics based on situational crime prevention theory to highlight the attack vectors and prevention methods for these systems. Much of the analysis can be applied to any distributed system (e.g. blockchain network), particularly any supposedly trustless off-chain component. The equations developed in the current study will hold for any two chains that are bridged and pass value back and forth and provides evidence to suggest a public sidechain is likely not a viable option for scalability due to security concerns. Criminal strategies on blockchain networks in the digital realm are similar to criminal strategies in the physical realm; therefore, the application of criminology can lead to more efficient development and ultimately more effective security protocols.

Note on the Author(s)

Nicholas J. Blasco, Daxia, Suite 100, 118 N. Market St., Frederick, MD 21701. USA. E-mail: nblasco@daxia.us

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