Author: Jorge Timón 2015-05-31 14:46:58
Published on: 2015-05-31T14:46:58+00:00
In an email from Gavin Andresen on May 30, 2015, he stated that mining is a competitive business and the marginal miner will always be going out of business regardless of block size, block subsidy, or transaction fees. However, the latter determines who can be profitable. He presented a thought experiment where the block subsidy is gone and all the block reward comes from fees. In this scenario, Miner A has great connectivity and mines 20 MB blocks with an average of 20 btc per block. On the other hand, Miner B has a connectivity such that 2 MB blocks puts it on a reasonable orphan rate, so it gets an average of 2 btc per block mined. Although the difficulty is the same for all, it can rise up to Miner A breaking even after energy costs. The question asks if Miner B will be profitable with this setup. The answer is no, and Miner B will just go out of business. This example shows that bigger blocks mean more mining centralization.
Updated on: 2023-06-09T19:58:30.927825+00:00