How to eliminate Large mining pools

[hextobig]

What's wrong with BetterHash? What miners are really required to be doing is run their own full nodes, and remove the mining pool's political leverage on the network, right?

It has been 2 years and Matt's proposal is not showing enough stem nor any promising signs on the horizon, so, I don't want to denounce it as a failed project but obviously there are serious shortcomings.

What is Betterhash?
Matt Corallo's Betterhash is designed to 'help' with the centralization of mining scene in bitcoin (and most PoW coins) which is considered as an inevitable consequence of pools dominating it.

The main idea is improving Stratum (the protocol behind pooling) such that individual miners could have a chance to build their custom blocks by including/excluding transactions deliberately while they are using pool operator's address in the coinbase transaction as the wallet that collects the rewards. This is done by a pretty sophisticated handshake phase in which the miner receives a block template from the pool in each round instead of receiving a simple block header (which commits to a full block of pool's choice and the miner has no clue about its contents) and trying to find a nonce for it which is how things work now.

For the miner to be able to fill in the block template, building his own block, it would be necessary to run a full node and it is the first not the last thing that this protocol does for improving decentralization in bitcoin. Other strengths include:
- Resisting covert censorship (my term) threats:
Officially, Matt and proponents of Betterhash believe that it is strong mitigation for censorship as a whole but it is not exactly the case. Pools are efficient when they are large enough and large pools are subject to political and jurisdiction intervention. Betterhash leaves centralized architecture of pool/miner relationship untouched and it is more than obvious that pool operators could be forced to reject miner generated blocks/shares that do include transactions that are hypothetically supposed to be censored and Betterhash can do absolutely nothing about it.

What Betterhash can do for censorship resistance tho is making it very hard and almost impossible for pool operators to do it covertly and in accordance with their private agendas.

- Resisting hash rate hijacking
It has been observed in some occasions pool operators use the miners' hash power to mine alternative chains for political purposes, Betterhash can mitigate this attack because miners are fully engaged with what they are mining.

- Collusion resistance
More block-generators, less collusion feasibility. Given Betterhash was possible to dominate the mining scene of bitcoin it would make it bulletproof against all forms of 51% attack.

So, why not Betterhash?
Unfortunately, Matt's protocol isn't employed and won't be ever because of a basic flaw: cost/benefit justifiability problem.

Looking again at the pros listed above (and other strengths not listed) it is obvious that they all share the same property of being strategically beneficial for bitcoin and lack one simple property: bringing any tangible advantage in terms of income for miners and pools at the same time that it comes with meaningful costs for miners and huge costs for pools.

Miners costs for implementing Betterhash
Besides the obvious cost of setting up a full node, miners need a substantially better internet connection and a local proxy and will experience a more 'stale rate' than what they get with legacy Stratum because it takes more time for the pool server to validate and accept their shares.

Pools costs
Here is the bottleneck. Better hash requires pool server to do an exhaustive job each time a miner issues a share and if they want to compete with the current Stratum utility level in terms of covering the variance it is not possible to use higher target difficulties for lowering the number of shares miners are used to submit. Hence a pool server should meet a very high level of hardware and Internet bandwidth requirement for handling the same number of miners that are connected now. The situation worsens considering the migration phase in which pool servers need to have parallel capacities for both versions of Stratum.

Conclusion
Betterhash is a good but impractical idea because it is trying to compete with the optimized (still fragile) current mining protocol without offering any tangible advantage. In a decentralized, wild environment like bitcoin, actors do not pay for and commit to what is considered good for the community without getting reasonable rewards almost instantly, it is called The Tragedy Of Commons.

You are right, but any new technology is very difficult to implement. Betterhash is still very attractive.

[elvisage]

If the private key signature is introduced into the puzzle, in addition to the risk of losing the funds, the problem of cooperative mining still exists, this will bring greater probability fluctuations to miners.

The risk of losing money is mainly the leakage of secret keys in memory. There have been vairous ways of protecting in-memory sensitive data. You can find a brief discussion on them in the Discussion section of VRF-based mining paper.

In the case of combining secret keys into mining, the cooperative mining is no longer a profitable choice. Instead, the equilibrium is that each miner mines by himself, even though reward is unstable. Let me elaborate here.
When mining takes secret keys as input, the pool will lose his secret key if outsourcing mining. When a miner gets the secret key of the pool operator, he can steal money hold by this secret key anonymously by various ways (e.g., via mixing services). In short, outsourcing enables miners to steal money anonymously.
Then, consider a game between two miners A and B. A and B do not trust each other, but they want to stabilise their mining reward by mining together. When mining takes secret keys as input, the game goes as follows. If both of them collaborate honestly, both get most reward, i.e., stable income. If A collaborates honestly but B behaves maliciously, B gets all mining reward. Vice versa for A behaving maliciously while B collaborating honestly. If A and B behave maliciously, they are basically solo mining.
Thus, the equilibrium for this system is that, each miner mines by himself and gives no chance for other miners to steal his mining reward.
In this way, even though mining reward is not stable, cooperative mining is a worse strategy than solo mining.

Regarding your solution, joining mining pools is still the best strategy for miners.
There is an optimal strategy for each miner. A miner can try first phase for lots of times until getting a small difficulty. The first phase can be run concurrently. A mining pool can spawn more concurrent executions of the first phase, so have more advantage on mining than solo mining. In this way, pooled mining is still profitable, and miners are still willing to join mining pools.

[Wind_FURY]

What's wrong with BetterHash? What miners are really required to be doing is run their own full nodes, and remove the mining pool's political leverage on the network, right?

In fact, BetterHash does not increase the security of Bitcoin through increasing decentralization, it merely shifts the point of centralization.

Because the pool operators still have a large amount of control, they may force miners to review certain rules under the threat of not being rewarded.

2POW proposed in this paper prevent cooperation between miners from the basis protocol, which make pools impossible.

That requires a hard fork? Then I believe there should be support for the proposal to be tested/experimented on an altcoin, not on Bitcoin.

[Sherlock.Holmes]

The risk of losing money is mainly the leakage of secret keys in memory. There have been vairous ways of protecting in-memory sensitive data. You can find a brief discussion on them in the Discussion section of VRF-based mining paper.

We are not going to discuss the risk of private keys.

Thus, the equilibrium for this system is that, each miner mines by himself and gives no chance for other miners to steal his mining reward.
In this way, even though mining reward is not stable, cooperative mining is a worse strategy than solo mining.

For two miners A and B, A has two nodes and B has two nodes too. A lets these two nodes mined for an account, which means cooperation, and B lets the two nodes mine independently for two accounts, which means non-cooperation. Then the probability of A winning is 3/4, and the probability of B winning is 1/4.

Regarding your solution, joining mining pools is still the best strategy for miners.
There is an optimal strategy for each miner. A miner can try first phase for lots of times until getting a small difficulty. The first phase can be run concurrently. A mining pool can spawn more concurrent executions of the first phase, so have more advantage on mining than solo mining. In this way, pooled mining is still profitable, and miners are still willing to join mining pools.

By 2POW, the probability of miner winning with cooperation is lower than non-cooperation. All A and B let their nodes mine independently, so the probability of A winning is 1/2, and B winning is 1/2.

Miners with more nodes have a higher probability of winning, which is reasonable. Miners let their nodes mine independently, and the probability of a single miner winning is equal to the number of nodes it provides/total number of nodes in the entire network, which is essentially different from the current mining pool model.

[Sherlock.Holmes]

That requires a hard fork? Then I believe there should be support for the proposal to be tested/experimented on an altcoin, not on Bitcoin.

This is an altcoin, not on bitcoin

[orange094]

I believe this mechanism are more decentralized, probably many small independent miners.

[earth1819]

While I find the problem considered in the paper interesting, as bitcoin suffer from the threat of large mining pools.

Assuming the suggested construction is correct, I recommend the authors to extensively revise the paper to include a more convincing security analysis as well as benchmarks and comparisons with existing solutions.

[Sherlock.Holmes]

While I find the problem considered in the paper interesting, as bitcoin suffer from the threat of large mining pools.

Assuming the suggested construction is correct, I recommend the authors to extensively revise the paper to include a more convincing security analysis as well as benchmarks and comparisons with existing solutions.

Sorry for the misunderstanding. If you think there are some problems, you can put forward more detailed suggestions, thank you.

[PrimeNumber7]

I read your paper, and I don't think it would eliminate mining pools, but it probably would change how mining pools operate. A mining pool may have some miners calculate the first phase of the PoW, send the result to the mining pool, which in turn sends the result to other miners, who attempt to calculate the second phase of the PoW, and once solved will send the solved calculate back to the pool. Or individual miners calculate both phases of the PoW, sends the solution to the pool, which distributes the mining rewards to each miner.

I would also firmly reject the notion that one individual should be the only person who has contributed to finding a block. In the current implementation of bitcoin, there are 144 blocks found per day, and by some estimates, there are 400k daily users of bitcoin. This is far too few people controlling the confirmation of transactions for many people.

[Sherlock.Holmes]

Hello, everyone
We have just launched the testnet, and everyone is welcome to participate. If you have any questions, please leave a message at the forum or email us. Thank you all. 

[Sherlock.Holmes]

I read your paper, and I don't think it would eliminate mining pools, but it probably would change how mining pools operate. A mining pool may have some miners calculate the first phase of the PoW, send the result to the mining pool, which in turn sends the result to other miners, who attempt to calculate the second phase of the PoW, and once solved will send the solved calculate back to the pool. Or individual miners calculate both phases of the PoW, sends the solution to the pool, which distributes the mining rewards to each miner.

I would also firmly reject the notion that one individual should be the only person who has contributed to finding a block. In the current implementation of bitcoin, there are 144 blocks found per day, and by some estimates, there are 400k daily users of bitcoin. This is far too few people controlling the confirmation of transactions for many people.

Sorry, I was busy with the testnet a while ago and did not reply to your message in time.

It is very difficult for cooperation in the first phase. Since the completion time of the first phase is random and uncontrollable, the scheduler must wait for all collaborators to complete and then select the node with best luck to enter the second phase. But the time spent in the first phase is the longest.

In addition, our difficulty adjustment strategy is designed in such a way that after the number of nodes in the entire network reaches a certain number, the difficulty of the first stage will be many times higher than the difficulty of the best luck in the second stage. Cooperation in the  second phase is meaningless.

[PrimeNumber7]

A pool could work like this:
The pool has 6 members, each with equal processing capacity.
Members A-D would work on the first phase, each on their own as if they were mining on their own account. Once one of the above members solved the first phase, they send the solution to a server, which sends it to one of members E-F who works on the second phase.
Each member will work on different work, will send their solution to a centralized server once they find a solution if applicable, and will share the rewards.

[BrewMaster]

Members A-D would work on the first phase, each on their own as if they were mining on their own account. Once one of the above members solved the first phase, they send the solution to a server, which sends it to one of members E-F who works on the second phase.

the idea of sharing work (pooling) is to have multiple workers that work in parallel to each other and not reply on other's solution. each worker gets its own work and submits the result of that work then gets the next parallel job.
if a worker has to wait for other worker to finish then it defeats the purpose and the optimization gained by parallel work.

[Sherlock.Holmes]

the idea of sharing work (pooling) is to have multiple workers that work in parallel to each other and not reply on other's solution. each worker gets its own work and submits the result of that work then gets the next parallel job.
if a worker has to wait for other worker to finish then it defeats the purpose and the optimization gained by parallel work.

Fair Point.

I think you used a more concise and more logical way to express what I want to say.

[Kakmakr]

I think the whole idea to stop large mining pools will just fail, because smaller miners are just naturally drawn to the large mining pools because of the higher potential for profits. A single miner will never be able to mine a block, but the collective pool will be able to do it and the gain is shared between the contributors. 

Also, last time when there was a potential for a 51% attack, miners decided on their own to leave those large pools and to join up with other pools to prevent it. It is better to save the cow and to still get the milk...than killing it and getting no milk in the future. 

In any way, centralization will be solved when more large pools in more countries would be established. The USA should start investing into the development of their own ASIC technology to compete with China. (Silicon Valley)

[Sherlock.Holmes]

I think the whole idea to stop large mining pools will just fail, because smaller miners are just naturally drawn to the large mining pools because of the higher potential for profits. A single miner will never be able to mine a block, but the collective pool will be able to do it and the gain is shared between the contributors. 

Also, last time when there was a potential for a 51% attack, miners decided on their own to leave those large pools and to join up with other pools to prevent it. It is better to save the cow and to still get the milk...than killing it and getting no milk in the future. 

In any way, centralization will be solved when more large pools in more countries would be established. The USA should start investing into the development of their own ASIC technology to compete with China. (Silicon Valley)

The pools work like this: 
   -->E --> Q --> ... --> X --> x1,x2,x3
A -->F --> R --> ...
   -->G --> ...

   --> I --> ...
B --> J --> ...
   --> K --> ...

The 2POW will work like this:
A --> a1,a2,a3,...
B --> b1,b2,b3,...
C --> c1,c2,c3,...

As shown above, under the pools model, there are multiple miners under each pool, and each miner has multiple sub-miners. In the end, each miner manages multiple nodes.

Under the 2POW model, due to the infeasibility of cooperation, there will be multiple independent miners, and there is no incentive for cooperation between them. Each miner independently manages several nodes. The total number of miners will be affected by market environment and competitive. The total number of miners also reflects the degree of decentralization of the system.

In fact, 2POW only broke the hierarchical relationship under the pools model, allowing miners to participate in competition more freely and fairly.

Of course, the success of the project depends on many factors, such as community recognition, market environment, political environment, whether it is maliciously attacked when the system is not safe enough, etc. Therefore, everyone needs to be united.

[philipma1957]

The other thing that has been discussed is that we do.....nothing.
A few smaller pools closed / closing now after the halving. In 4 years it's going to happen again. But, there will probably be a few of the larger ones that go away too.
3.125BTC + fees might will just not leave enough money in it unless we are at $50K+USD per BTC.
In 2028 unless something else changes when we hit 1.6BTC per block + fees if BTC is not worth a ton you can bet difficulty is going to plummet, and the small PPS pools where people come to play are going to pop up all over the place.

Just my view.

If BTC goes wayyyy up in price then you can ignore all of the above.
If it falls to sub $3K and stays there then it's going to happen sooner.

-Dave

This is also  my model for BTC.

'At the current price and difficulty right now the best gear does 30 watts a th.
It is about 100 th so it does 3 kwatts an hour or 75 kwatts a day
100 th earns 7.10 a day'

a bit math lazy but close enough and easy to visualize.
So the best machine would earn

$7.10-$0.75  = $6.35 a day or 300 days to break even at 1 cent power/costs and 2,000 per machine
$7.10-$1.50  = $5.60 a day or 358 days to break even at 2 cent power/costs    
$7.10-$2.25  = $4.85 a day or 412 days to break even at 3 cent power/costs
$7.10-$3.00  = $4.10 a day or 487 days to break even at 4 cent power/costs
$7.10-$3.75  = $3.35 a day or 597 days to break even at 5 cent power/costs

These are the fundamental economic pressure of mining costs.

1)Coin price
2)gear price
3)difficulty
4)power and infrastructure costs

Nothing makes them go away

Try to create a mining algorithm to encourage my 1.2 ph to mine in a small pool. with 10 guys like myself is not going to do much.

We are pretty much locked into this set of factors above 1-4.

I can write pages on the edge large builders and large pools and large exchanges have.
Truth is they can not be stopped other than governments going after them.
I am not sure I like that idea.

I consider this time to be low tide and I look around for a decent shell win the mud here and there.
I do not try to launch a new boat.

[hextobig]

Try to create a mining algorithm to encourage my 1.2 ph to mine in a small pool. with 10 guys like myself is not going to do much.

I think the author’s idea is not to create a mining algorithm to encourage everyone to mine in a small pool, but to let everyone compete freely in a more fair environment without any form of alliances and monopolies.

[PrimeNumber7]

Members A-D would work on the first phase, each on their own as if they were mining on their own account. Once one of the above members solved the first phase, they send the solution to a server, which sends it to one of members E-F who works on the second phase.

the idea of sharing work (pooling) is to have multiple workers that work in parallel to each other and not reply on other's solution. each worker gets its own work and submits the result of that work then gets the next parallel job.
if a worker has to wait for other worker to finish then it defeats the purpose and the optimization gained by parallel work.

The OP describes the first process to take longer than the second process. If for example, the first process takes twice as long as the second process, a mining pool can allocate 2/3 of miners to work on the first process and 1/3 on the second process, and given enough workers, there will be little 'downtime'.

As an alternative, workers could complete both the first and second processes, periodically send some type of verification they are working. Or a single entity could own many computers, each of which is a miner, and each of which is programmed to send the block reward to the same address controlled by the same entity.

[philipma1957]

Try to create a mining algorithm to encourage my 1.2 ph to mine in a small pool. with 10 guys like myself is not going to do much.

I think the author’s idea is not to create a mining algorithm to encourage everyone to mine in a small pool, but to let everyone compete freely in a more fair environment without any form of alliances and monopolies.

Yeah I known, but you simply can't get around the factors of

1) coin price
2) difficulty
3) power+infrastructure cost
4) price of gear.

Look at a big pool + builder try to see what the edge is for them>

Take bitmain their pools their cloud hashing and their exchange.

Once you see what they have done you realize you can only beat them with governments that hurt them.
No algorithm will work to beat them.
And as long as they exist 3 to 10 large pools will always be.

The leverage they can do by having cloud mining as part of their business model is far greater than most understand.

Look at their bitdeer plans
https://www.bitdeer.com/pricing/?id=1

Try to understand there is zero account and inspection for what they offer.
Try to understand that the s19pro they offer does 110th and 29watts.
I am 99% certain they can be tuned to do 100th and 22watts
In their case they build the gear so that loss of 10 th is meaning less.

Now see that they offer.  Many complex contracts based on s17pro

Imagine that they simply use 100th 22 watt gear in their cloud and charge you for. 2 s17 pros at 38 watts a markup

this is a huge power over charge.

 Also see they say the power and infrastructure charge is 5.4 cents a kwatt

that is a mark up from 2-3 cents.

they base sales of cloud prices on retail prices of gear another mark up

and they have the fuck you clause which says we can cancel contract when ever we please. an un real edge

they did this to me in 2017 when coins rose from 3000 to 6000 to 9000 they cancelled

I made money but contract would have lasted til Jan 2018. not Nov 2019 .

This is pretty much impossible to stop with out governments doing it.

and as I said I don't trust governments very much