Diversification Across Mining Pools: Optimal Mining Strategies under PoW

05/12/2019
by   Panagiotis Chatzigiannis, et al.
0

Mining is a central operation of all proof-of-work (PoW) based cryptocurrencies. The vast majority of miners today participate in "mining pools" instead of "solo mining" in order to lower risk and achieve a more steady income. However, this rise of participation in mining pools negatively affects the decentralization levels of most cryptocurrencies. In this work, we look into mining pools from the point of view of a miner: We present an analytical model and implement a computational tool that allows miners to optimally distribute their computational power over multiple pools and PoW cryptocurrencies (i.e. build a mining portfolio), taking into account their risk aversion levels. Our tool allows miners to maximize their risk-adjusted earnings by diversifying across multiple mining pools which enhances PoW decentralization. Finally, we run an experiment in Bitcoin historical data and demonstrate that a miner diversifying over multiple pools, as instructed by our model/tool, receives a higher overall Sharpe ratio (i.e. average excess reward over its standard deviation/volatility).

READ FULL TEXT

page 1

page 2

page 3

page 4

research
01/15/2019

Selfish Mining in Ethereum

As the second largest cryptocurrency by market capitalization and today'...
research
02/06/2018

On the Preliminary Investigation of Selfish Mining Strategy with Multiple Selfish Miners

Eyal and Sirer's selfish mining strategy has demonstrated that Bitcoin s...
research
05/15/2019

An Empirical Evaluation of Selfish Mining and Strategic Mining in Proof-of-Work Blockchain with Multiple Miners

Nowadays, Bitcoin and Proof-of-Work blockchain systems are becoming prom...
research
02/28/2019

Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash?

In Aug. 2017, Bitcoin was split into the original Bitcoin (BTC) and Bitc...
research
05/15/2019

A Deep Dive into Bitcoin Mining Pools: An Empirical Analysis of Mining Shares

Miners play a key role in cryptocurrencies such as Bitcoin: they invest ...
research
01/24/2018

Green Mining: toward a less energetic impact of cryptocurrencies

While cryptocurrencies continue to gain popularity, their energy cost is...
research
08/12/2021

On Liquidity Mining for Uniswap v3

The recently proposed Uniswap v3 replaces the fungible liquidity provide...

Please sign up or login with your details

Forgot password? Click here to reset