the attacker does not gain any direct benefit by performing the attack
Hi guys,
It is NOT true that the attacker cannot benefit from such an attack!
In our paper published 6 months ago we explain how to make block withholding attacks PROFITABLE.
It is very very simple and gains can be quite substantial in practice, see:
http://arxiv.org/abs/1402.1718Well, the first assumption under the block withholding section of that paper is already wrong.
We assume that all miners mine in pools, small and large. Miners in one pool mine with the public key of the pool manager which later re-distributes the gains.
Both Eligius and P2Pool do not use this method.
We assume that the pool managers are perfectly neutral and do not try to detect or prevent any unusual behavior.
Also untrue, at least in the case of Eligius, as made obvious previously.
While I'm just going to stop there, since some of your initial assumptions are just wrong, I must assume the balance of the section is equally so. Skimming it looks like you assume the withholding miner has some 20% of the network hash rate... then go on to say they can have greater returns by withholding than legitimate miners somehow. Magic I guess.