Published on: 2019-10-21T03:34:12+00:00
A Bitcoin miner has proposed a trustless contract to ensure minimum profitability for mining operations. The contract is implemented as a Bitcoin transaction and involves both the insurer and the miner. It includes a deposit from the insurer and a premium payment from the miner. The contract has three conditions for payment: expiry date, mutual agreement, or the provision of a pre-image that produces a hash within certain difficulty constraints. The main idea behind the contract is to guarantee a minimum profitability for the miner in case hashing becomes cheap enough to make it more profitable to find a suitable pre-image instead of mining Bitcoin.The proposed contract allows the miner to still mine Bitcoin and compensate for lower-than-expected rewards by using part of the insurance deposit. However, there are implementation challenges due to the inability to perform arithmetic comparison with long integers >32bit in the script. This means that the difficulty requirement needs to be handled in a hacky manner. One possible solution is to use the hashes of one or more pre-images with a given short length, where the miner must provide the exact pre-images chosen by the insurer.Eric Voskuil questions the assumption underlying the problem statement. He argues that if any miner is profitable, it is the miner with the new equipment. He believes that if a miner with new equipment is not profitable, the hash rate will drop until it becomes profitable. He suggests that the assumption of increasing hash rate implies an expectation of increasing return on investment. Therefore, he argues that a loss on new equipment implies that all miners are operating at a loss, which is not a sustainable situation.The discussion concludes with Lucas expressing more interest in the technical feasibility of the contract than its economic practicality in the present. The proposal was discussed on the bitcoin-dev mailing list, and feedback on the idea was requested.In conclusion, the proposed trustless contract offers a potential solution to guarantee minimum profitability for Bitcoin mining operations. However, there are challenges in its implementation, particularly regarding the handling of difficulty requirements. Eric Voskuil raises questions about the assumption that all miners are unprofitable, stating that a miner with new equipment should be profitable, and if not, the hash rate will decrease until it becomes profitable.
Updated on: 2023-08-02T01:29:08.553046+00:00