Author: Michael Gronager 2013-11-15 10:47:53
Published on: 2013-11-15T10:47:53+00:00
The document is a technical discussion of the expected return on a block in bitcoin mining. The author argues that increased centralization leads to an increased return on investment per unit hashing power, regardless of the actual functions involved, as long as certain requirements are met. These requirements are set out in the document. The author provides a detailed derivation of $P(Q,L)$, which is the probability that a block of size $L$ produced by a miner with relative hashing power $Q$ will be orphaned. The assumptions and conditions for this derivation are also given. The probabilities and outcomes of a miner finding a block during full consensus are discussed. The author presents a state tree describing the possible outcomes, with Miner Q winning if states 1, 2.1, or 3.1 are reached. The probabilities of reaching these states are derived using block interval lambda, with P(Q,L) represented as 1 - (1-Q)t/lambda. The author then goes on to discuss the derivation of E'(Q), with f(L) representing a linear demand model, and solves for L. Finally, the author argues that all orphaned blocks should be relayed to even the playing field and prevent a sybil attack on the network.The implications of these findings are also discussed. While there is an incentive for mining to centralize, other factors such as social pressure may outweigh this incentive. Overall, the document provides valuable insights into the workings of bitcoin mining and its potential implications for the wider cryptocurrency ecosystem.
Updated on: 2023-06-07T20:04:11.798927+00:00