This is a summary of my understanding of their method after a very quick scan of their docs:
They assume working as a malicious/selfish pool having less than 50% of hash rate, but still a significant portion of the total hash rate. All other miners that are not part of the selfish pool are called honest miners.
When selfish pool finds a block, they don't advertise it but continue mining their forked, private blockchain. They have an advantage of one block over the public blockchain now. Of course they have no chance of building longer blockchain in the long term, as they have less than 50% of hashing power and the public blockchain will always get longer after some number of blocks. But what they count on is this:
Scenario 1: honest miners discover a block and the public blockchain gets the same length as the selfish blockchain. They immediately publish their block as soon as they discover someone else discovered a block. They hope to create a race condition and a public blockchain fork - so that some hones miners will get the “honest” block, but some of honest miners will get their “selfish” block and start mining using it as a base. Having some of the honest miners on their side they have a chance that their fork will get longer and the “honest” fork will be declined by the network.
Scenario 2: selfish pool is lucky and discovers another block, giving their blockchain two blocks advantage over the public blockchain. They continue mining and they publish one block for every block discovered by the honest miners. This creates race condition with some of the honest miners on their side, but they still have some blocks found and not published. They publish all their remaining blocks as soon as their advantage decreases to one block. The network chooses their branch as it's longer and they get all the reward coins from their secretly mined chain.
Now, I know nothing about blocks discovery/notification mechanisms over the network and how fast it works, so an important question to someone knowledgeable is if this is a probable scenario that their block published only after some competing block has been found and published has still a chance to get to some significant number of honest miners first so that they start mining over their block - as this is required for their strategy to work.
If the above is viable, then this strategy of course requires some significant hash rate share, but I remember that even having 10% of total hash rate, the probability that you will mine couple of blocks in a row is quite high - and that's all you need to create situations when you have two-three blocks advantage over the public blockchain.
In scenario 1 the selfish pool will lose the block in most cases. Modern pools have a lot of connection to the network, so as not to waste mining on orphaned block. It will get the honest block before the selfish pool block.
This is interesting since I have found very little information about Bitcoin operating on poorly connected networks (i.e. most nodes are not directly reachable from any given node.) Given the current trend toward internet censorship, I wonder if Bitcoin will have to adapt to such networks as the norm.
They assume working as a malicious/selfish pool having less than 50% of hash rate, but still a significant portion of the total hash rate. All other miners that are not part of the selfish pool are called honest miners.
When selfish pool finds a block, they don't advertise it but continue mining their forked, private blockchain. They have an advantage of one block over the public blockchain now. Of course they have no chance of building longer blockchain in the long term, as they have less than 50% of hashing power and the public blockchain will always get longer after some number of blocks. But what they count on is this:
Scenario 1: honest miners discover a block and the public blockchain gets the same length as the selfish blockchain. They immediately publish their block as soon as they discover someone else discovered a block. They hope to create a race condition and a public blockchain fork - so that some hones miners will get the “honest” block, but some of honest miners will get their “selfish” block and start mining using it as a base. Having some of the honest miners on their side they have a chance that their fork will get longer and the “honest” fork will be declined by the network.
Scenario 2: selfish pool is lucky and discovers another block, giving their blockchain two blocks advantage over the public blockchain. They continue mining and they publish one block for every block discovered by the honest miners. This creates race condition with some of the honest miners on their side, but they still have some blocks found and not published. They publish all their remaining blocks as soon as their advantage decreases to one block. The network chooses their branch as it's longer and they get all the reward coins from their secretly mined chain.
Now, I know nothing about blocks discovery/notification mechanisms over the network and how fast it works, so an important question to someone knowledgeable is if this is a probable scenario that their block published only after some competing block has been found and published has still a chance to get to some significant number of honest miners first so that they start mining over their block - as this is required for their strategy to work.
If the above is viable, then this strategy of course requires some significant hash rate share, but I remember that even having 10% of total hash rate, the probability that you will mine couple of blocks in a row is quite high - and that's all you need to create situations when you have two-three blocks advantage over the public blockchain.