Bitcoin mining pools: A cooperative game theoretic analysis

Yoad Lewenberg, Yoram Bachrach, Yonatan Sompolinsky, Aviv Zohar, Jeffrey S. Rosenschein

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

188 Scopus citations

Abstract

Bitcoin is an innovative decentralized cryptocurrency whose core security relies on a "proof of work" procedure, which requires network participants to repeatedly compute hashes on inputs from a large search space. Finding one of the rare inputs that generates sin extremely low hash value is considered a successful attempt, allowing miners to approve new transactions and, in return, to collect rewards in bitcoins. This reward allocation, which provides the incentive for miners to participate, is a random process with a large variance. Miners who desire a steady income thus often participate in mining pools that divide among their members the earned rewards, and reduce this variance. Mining pools sure slightly better at coordinating participants due to lowerlatency communication, a fact which implies that they manage to collect slightly higher rewards. We examine dynamics of pooled mining and the rewards that pools manage to collect, and use cooperative game theoretic tools to analyze how pool members may share these rewards. We show that for some network parameters, especially under high transaction loads, it is difficult or even impossible to distribute rewards in a stable way: some participants are always incentivized to switch between pools.

Original languageAmerican English
Title of host publicationAAMAS 2015 - Proceedings of the 2015 International Conference on Autonomous Agents and Multiagent Systems
EditorsEdith Elkind, Gerhard Weiss, Pinar Yolum, Rafael H. Bordini
PublisherInternational Foundation for Autonomous Agents and Multiagent Systems (IFAAMAS)
Pages919-927
Number of pages9
ISBN (Electronic)9781450337700
StatePublished - 2015
Event14th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2015 - Istanbul, Turkey
Duration: 4 May 20158 May 2015

Publication series

NameProceedings of the International Joint Conference on Autonomous Agents and Multiagent Systems, AAMAS
Volume2
ISSN (Print)1548-8403
ISSN (Electronic)1558-2914

Conference

Conference14th International Conference on Autonomous Agents and Multiagent Systems, AAMAS 2015
Country/TerritoryTurkey
CityIstanbul
Period4/05/158/05/15

Bibliographical note

Publisher Copyright:
Copyright © 20IS, International Foundation for Autonomous Agents and Multiagent Systems (www.ifiaamas.org). All rights reserved.

Keywords

  • Bitcoin
  • Cooperative game
  • Game theory
  • Mining pool

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