1/ Thread on variance. PoW mining is critical to Bitcoin network security. Mining, in turn, is subject to 3 major sources of variance, from (roughly) easiest to tame to hardest: i/ Finding blocks via SHA256 hashing ii/ Market demand (for BTC & transactions) iii/ Tech innovation
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2/ Quick note: contrary to popular belief that miners are bad & evil, they are vital to Bitcoin’s survival. So it’s imperative to foster a healthy mining industry.
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3/ The best miners would be the ones who understand the nature of these variances & know how to handle them most effectively.
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4/ For variance in finding blocks: For small solo-miners, the variance in finding blocks (& consequently, the variance in payouts) is too great to make mining practical.
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5/ Fortunately, hashing is a Poisson process. This means that on average there are 10 mins between blocks. The larger your hash rate, the closer you’ll get to this ~10 min/block average, and the more stable your payout curve.
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Hugo Nguyen Retweeted Hugo Nguyen
6/ Solution for variance in finding blocks: join a pool. Currently, Stratum pools are popular. The downside of Stratum pools is that miners give up the right to propose blocks & harm decentralization. With BetterHash proposal, this will hopefully change.https://twitter.com/hugohanoi/status/1004455570953330689 …
Hugo Nguyen added,
Hugo Nguyen @hugohanoi@TheBlueMatt's brilliant proposal that separates 1/ block construction process from 2/ payout process. You'll still get the benefit of connecting to a pool (stable payouts) while not conceding the right to propose a block. Best of both worlds solution that will help d14n.
https://twitter.com/TheBlueMatt/status/1004106026721972224 …2 replies 0 retweets 9 likesShow this thread -
Replying to @hugohanoi
Great thread, Hugo. I haven't read Matt's proposal yet, so forgive my ignorance but I'm very curious whether it's possible, even theoretically, for block rewards to be assigned proportionally based on hash contribution *at the protocol level*? Or is that completely bonkers?
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Replying to @real_vijay @hugohanoi
If it were possible it would completely obviate the need for pooling which is one of the most powerful causes of centralization in mining.
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Replying to @real_vijay
Thanks!
By "protocol level" do you mean the Bitcoin protocol? I don't think that's possible
It's binary: either you successfully mine a block, or you don't.
Pool protocols are different though, since they work on top of Bitcoin, they can assign rewards proportionally.2 replies 0 retweets 2 likes -
Replying to @hugohanoi @real_vijay
It's true that pooling as they exist today (Stratum) causes centralization. But that's precisely what Matt's BetterHash is designed to fix, AFAIU.
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When pooling using BetterHash protocol, individual miners get to propose blocks & choose which txs to include themselves - which significantly reduces the chance of a 51% attack.
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