> Except that by withholding their block, they got a headstart so they are more likely to find the second block. So it's not the same.

Withholding their block (5s or whatever) doesn't make them more likely to find the second block. The probability of finding a block is always the same, given a hashrate.

They are the only ones mining on this particular chain, but that's not an advantage either. How mining on a hidden chain is an advantage?

On the other hand, withholding certainly makes them more likely to lose the reward of the block.

> They are the only ones mining on this particular chain, but that's not an advantage either. How mining on a hidden chain is an advantage?

It's easier to see the argument if you have a head start. Imagine you've somehow created a private chain that's 10 blocks ahead of the public chain. You could publish that now and earn 10 blocks of reward, or you could continue mining until the lead diminishes to 0 blocks, earning the same 10 blocks of reward plus however many blocks you've mined in the meantime.

If you have 50%+ε of the hash rate on the network, this argument would have you bully other miners out by almost always stranding their blocks, since in expectation you'll mine blocks faster than your competitors.

The insight is that this same situation can happen probabilistically with a finite but non-majority fraction of the hash rate on the network. With 49% of the hash rate you'll still be able to build a private chain some fraction of the time, so waiting a little bit to see if this occurs might have positive expected value.

the key to realize is that this strategy only makes sense if you have a considerable fraction of total hashrate. If you have 10% hashrate, delaying for 1 block period gives you a 10% chance of finding another block on top (that no one else can search for because you haven't published the first one).