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On Reward Sharing in Blockchain Mining Pools

Author

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  • Can, Burak

    (RS: FSE DKE Mathematics Centre Maastricht, Data Analytics and Digitalisation, RS: GSBE other - not theme-related research)

  • Hougaard, Jens Leth
  • Pourpouneh, Mohsen

Abstract

This paper proposes a conceptual framework for the analysis of reward sharing schemes in mining pools, such as those associated with Bitcoin. The framework is centered around the reported shares in a pool instead of agents and results in two new fairness criteria, absolute and relative redistribution. These criteria impose that the addition of a share to the pool affects all previous shares in the same way, either in absolute amount or in relative ratio. We characterize two large classes of economically viable reward sharing schemes corresponding to each of these fairness criteria in turn. We further show that the intersection of these classes brings about a generalization of the well-known proportional scheme, which also leads to a new characterization of the proportional scheme as a corollary.

Suggested Citation

  • Can, Burak & Hougaard, Jens Leth & Pourpouneh, Mohsen, 2021. "On Reward Sharing in Blockchain Mining Pools," Research Memorandum 009, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2021009
    DOI: 10.26481/umagsb.2021009
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    References listed on IDEAS

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    2. Lin William Cong & Zhiguo He & Jiasun Li & Wei Jiang, 2021. "Decentralized Mining in Centralized Pools [Concentrating on the fall of the labor share]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1191-1235.
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    6. Bruno Biais & Christophe Bisière & Matthieu Bouvard & Catherine Casamatta, 2019. "The Blockchain Folk Theorem," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1662-1715.
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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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