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Verifier's Dilemma

The Verifier’s Dilemma results from the lack of incentives for verifying and storing new transactions on a blockchain and is typically associated with those blockchains using Proof of Work (PoW).

Some blockchain 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 allocating 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.

Miners may decide that due to the non-trivial computational requirements and their limited computational capacity, it is more beneficial to focus on the next, more potentially profitable block instead of validating the current block, which may result in no profits. In this scenario, however, if all miners were to deviate, that would cause serious security vulnerabilities in the network. On the other hand, malicious actors could intentionally submit computationally intensive transactions. While the miners work to validate those transactions, the malicious actor could get a head start on mining the next block. Miners must weigh the risks of potentially giving up profit but securing the network versus greater profits at the potential cost of making the network vulnerable to attack.

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