Cyber Insurance Design for Validator Rotation in Sharded Blockchain Networks: A Hierarchical Game Based Approach

Abstract

Sharding is a promising solution to achieving scalability within the blockchain network. A sharded blockchain network consists of a beacon chain and several committees powered by the participants (i.e. validators) through the Proof-of-Stake (PoS) consensus protocol. Efficient and scalable as it can be, the sharded blockchain based on PoS is vulnerable to discouragement attack. A discouragement attack occurs when malicious validators censor messages to discourage validators from participating in the network. Furthermore, no rate-limiting validator rotation (enter/exit quickly) makes it more challenging to detect such an attack. In this paper, considering the undetermined rotation and the discouragement attack, we render the beacon chain an intermediary, allowing the beacon chain to interact with validators and the cyber-insurer, aiming to encourage the validators’ stable rotation through insurance compensation. Specifically, we utilize a two-stage hierarchical game-based model to formulate the complicated interactions under the cyber insurance framework. In the first stage, the beacon chain develops compensatory strategies according to the insurer’s profile. In the second stage, the beacon chain designs a series of contracts for validators, including insurance items, compensatory strategies, and rotation requirements. Consequently, the proposed scheme incentivizes validators to remain online by transferring risk to the cyber insurer and enables the sharded blockchain network to weaken the attack’s impact through validators’ stable rotation. This paper presents closed-form solutions for the proposed model, in which the beacon chain and the cyber insurer can gain maximized profits. The simulations demonstrate the feasibility and superiority of the proposed model. IEEE