BlockPow: A Practical Proposal to prevent mining pools AND reduce payoff variance:

Summary:

Sergio Lerner has proposed a new setting to prevent mining pools and reduce payoff variance. This requires increasing the block-rate and changing the Bitcoin PoW, while still allowing current Bitcoin ASICs to work. The block rate must be increased at least 20 times and blocks must still be near full. BlockPow is a kind of PoW that only practically prevents mining pools for certain cryptocurrency settings based on concepts similar to parmacoin. The idea is that if miners try to join a pool, then they incur overhead of transmitting information and earn less than working solo. Mining now requires the knowledge of the block b to be mined, and b must be received at each block-chain epoch. This could create an incentive not to include any transaction and use an almost empty b, because that way the bandwidth requirements are decreased. But this incentive should not exist normally, since by including transactions the solo miner gets additional revenue from fees, which is lost if the block is empty. To prevent this possible incentive we can append to b a subset of previous blocks (e.g 100 blocks). Now if the miner wants to be a dumb node and take part of a pool, then the current working unsolved block (the template) must be sent each time from the pool admin to each miner. If the pool admin hosts 1000 miners, then to serve them with fresh block templates he needs 1000 times more bandwidth that the miners, making this much more expensive. For example, in a block-chain with a 5 seconds block-rate, such as in NimbleCoin, each block can be as large as 200Kbytes (100 tps are allowed). A miner will require the block template to be ready as fast as possible, say before 3 seconds, so as not to lose more than 60% of the times the transaction fees present in the block template. This means that a pool admin serving 1000 clients must have an upload bandwidth of at least 60 Mbytes/sec, and load balance servers, because all miners will demand the block template at the same time and will compete for it. This method to discourage mining pools only work as long as time is taken to transmit a block is comparable to the block interval time, e.g. 20%. This seems not to be a problem since if the cryptocurrency becomes popular, then we can expect blocks to be near full, while if is not, then nobody will care about mining pools. For this method to work for Bitcoin, Bitcoin should reduce the block rate to at least 1 minute, and keep blocks of at least 10 Mbytes. The sole reduction of the block rate from 10 minutes to 5 seconds would reduce notably the mining reward variance, which is the main reason miners don't mine solo.

Updated on: 2023-06-09T00:24:12.176759+00:00