Verifier’s Dilemma

The Verifier’s Dilemma results from the lack of incentives for verifying and storing records of new transactions in Proof-of-Work consensus protocols, such as Bitcoin’s. Such protocols assert that miners should verify new blocks and keep a record of the blockchain without compensation, doing so only to maintain the integrity of the network on which they theoretically rely for block rewards. However, the computation-intensive nature of PoW mining incentivizes the most efficient use of energy and computing resources, tempting many miners to reallocate resources from verification and node storage to block production. The Verifier’s Dilemma refers to the decisions a miner must make about the allocation of resources to both mining and verifying, as they are forced to weigh the risks of not fully verifying against the potential profitability of not doing so. As Bitcoin is secured by its decentralized network of nodes, low node participation in both verification and blockchain storage resulting from the Verifier’s Dilemma undermines the security and integrity of the blockchain. Variations of the Verifier’s Dilemma may be applicable to other consensus protocols, such as Proof-of-Stake.