IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v136y2022icp274-298.html
   My bibliography  Save this article

On reward sharing in blockchain mining pools

Author

Listed:
  • Can, Burak
  • Leth Hougaard, Jens
  • 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 introduces two new fairness criteria: absolute and relative redistribution. These criteria impose that the addition of a share to a round affects all previous shares of the round in the same way, either in absolute amount or in relative ratio. We characterize two large classes of 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 in turn leads to a new characterization of the proportional scheme itself.

Suggested Citation

  • Can, Burak & Leth Hougaard, Jens & Pourpouneh, Mohsen, 2022. "On reward sharing in blockchain mining pools," Games and Economic Behavior, Elsevier, vol. 136(C), pages 274-298.
    • Handle: RePEc:eee:gamebe:v:136:y:2022:i:c:p:274-298
    DOI: 10.1016/j.geb.2022.10.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825622001361
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2022.10.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chun, Youngsub, 1988. "The proportional solution for rights problems," Mathematical Social Sciences, Elsevier, vol. 15(3), pages 231-246, June.
    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.
    3. 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.
    4. Roger B. Myerson, 1977. "Graphs and Cooperation in Games," Mathematics of Operations Research, INFORMS, vol. 2(3), pages 225-229, August.
    5. Hougaard, Jens Leth & Moreno-Ternero, Juan D. & Tvede, Mich & Østerdal, Lars Peter, 2017. "Sharing the proceeds from a hierarchical venture," Games and Economic Behavior, Elsevier, vol. 102(C), pages 98-110.
    6. Moulin,Hervi, 1991. "Axioms of Cooperative Decision Making," Cambridge Books, Cambridge University Press, number 9780521424585.
    7. Jacob D. Leshno & Philipp Strack, 2020. "Bitcoin: An Axiomatic Approach and an Impossibility Theorem," American Economic Review: Insights, American Economic Association, vol. 2(3), pages 269-286, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Burak Can & Jens Leth Hougaard & Mohsen Pourpouneh, 2020. "On Reward Sharing in Blockchain Mining Pools," IFRO Working Paper 2020/09, University of Copenhagen, Department of Food and Resource Economics.
    2. Hanna Halaburda & Guillaume Haeringer & Joshua Gans & Neil Gandal, 2022. "The Microeconomics of Cryptocurrencies," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 971-1013, September.
    3. Ju, Biung-Ghi, 2013. "Coalitional manipulation on networks," Journal of Economic Theory, Elsevier, vol. 148(2), pages 627-662.
    4. Joshua S. Gans & Hanna Halaburda, 2023. ""Zero Cost'' Majority Attacks on Permissionless Blockchains," NBER Working Papers 31473, National Bureau of Economic Research, Inc.
    5. Ricardo Martínez & Juan D. Moreno‐Ternero, 2024. "Redistribution with needs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    6. Hao Wu & Rene van den Brink & Arantza Estevez-Fernandez, 2022. "The locally partial permission value for games with a permission structure," Tinbergen Institute Discussion Papers 22-037/II, Tinbergen Institute.
    7. Joshua S. Gans & Richard Holden, 2022. "Mechanism Design Approaches to Blockchain Consensus," Papers 2206.10065, arXiv.org.
    8. Bruno, August & Weber, Paige & Yates, Andrew J., 2023. "Can Bitcoin mining increase renewable electricity capacity?," Resource and Energy Economics, Elsevier, vol. 74(C).
    9. Hinzen, Franz J. & John, Kose & Saleh, Fahad, 2022. "Bitcoin’s limited adoption problem," Journal of Financial Economics, Elsevier, vol. 144(2), pages 347-369.
    10. Li Guo & Wolfgang Karl Hardle & Yubo Tao, 2018. "A Time-Varying Network for Cryptocurrencies," Papers 1802.03708, arXiv.org, revised Nov 2022.
    11. Benigno, Pierpaolo & Schilling, Linda M. & Uhlig, Harald, 2022. "Cryptocurrencies, currency competition, and the impossible trinity," Journal of International Economics, Elsevier, vol. 136(C).
    12. Nikhil Malik & Manmohan Aseri & Param Vir Singh & Kannan Srinivasan, 2022. "Why Bitcoin Will Fail to Scale?," Management Science, INFORMS, vol. 68(10), pages 7323-7349, October.
    13. Bahel, Eric & Trudeau, Christian, 2019. "Stability and fairness in the job scheduling problem," Games and Economic Behavior, Elsevier, vol. 117(C), pages 1-14.
    14. Podhorsky, Andrea, 2023. "Taxing bitcoin: Incentivizing the difficulty adjustment mechanism to reduce electricity usage," International Review of Financial Analysis, Elsevier, vol. 86(C).
    15. Schilling, Linda & Fernandez-Villaverde, Jesus & Uhlig, Harald, 2020. "Central Bank Digital Currency: When price and bank stability collide," MPRA Paper 113248, University Library of Munich, Germany, revised 01 May 2022.
    16. Zhang, Zhiming & Ren, Da & Lan, Yanfei & Yang, Shanxue, 2022. "Price competition and blockchain adoption in retailing markets," European Journal of Operational Research, Elsevier, vol. 300(2), pages 647-660.
    17. Yuzhi Yang & Erik Ansink & Jens Gudmundsson, 2023. "How to Pollute a River If You Must," Tinbergen Institute Discussion Papers 23-036/VIII, Tinbergen Institute.
    18. Encarnacion Algaba & Rene van den Brink, 2021. "Networks, Communication and Hierarchy: Applications to Cooperative Games," Tinbergen Institute Discussion Papers 21-019/IV, Tinbergen Institute.
    19. Feng, Wenjun & Zhang, Zhengjun, 2023. "Currency exchange rate predictability: The new power of Bitcoin prices," Journal of International Money and Finance, Elsevier, vol. 132(C).
    20. Michael Brolley & Marius Zoican, 2019. "Liquid Speed: On-Demand Fast Trading at Distributed Exchanges," Papers 1907.10720, arXiv.org.

    More about this item

    Keywords

    Blockchain; Bitcoin; Fairness; Mining pools; Resource allocation; Mechanism design;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:136:y:2022:i:c:p:274-298. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.