  Consensus algorithms facilitate agreement on and resolution of blockchain
functions, such as smart contracts and transactions. Ethereum uses a
Proof-of-Stake (PoS) consensus mechanism, which depends on financial incentives
to ensure that validators perform certain duties and do not act maliciously.
Should a validator attempt to defraud the system, legitimate validators will
identify this and then staked cryptocurrency is `burned' through a process of
slashing.
  In this paper, we show that an attacker who has compromised a set of
validators could threaten to perform malicious actions that would result in
slashing and thus, hold those validators to ransom. We use game theory to study
how an attacker can coerce payment from a victim, for example by deploying a
smart contract to provide a root of trust shared between attacker and victim
during the extortion process. Our game theoretic model finds that it is in the
interests of the validators to fully pay the ransom due to a lack of systemic
protections for validators. Financial risk is solely placed on the victim
during such an attack, with no mitigations available to them aside from
capitulation (payment of ransom) in many scenarios. Such attacks could be
disruptive to Ethereum and, likely, to many other PoS networks, if public trust
in the validator system is eroded. We also discuss and evaluate potential
mitigation measures arising from our analysis of the game theoretic model.
