Decentralized Mining in Centralized Pools
summary
Model shows risk aversion drives miners into proportional pools but miners split hash across pools rather than consolidate, so decentralization can persist; allowing pooling raises total hash power and triggers an arms race that inflates energy use. Empirical facts: top five pools hold about 62% of hash (peaked ~75% in 2017) and average pool fee sits near 2%. A small pool membership already yields roughly a 20% boost in certainty‑equivalent payoff. Larger pools optimally charge higher fees because cutting fees would invite more hash and worsen the zero‑sum race.
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chapters (12)
- 0:00Intro
- 0:55Armsraces
- 3:47War
- 6:16Results
- 9:24Arms Race
- 10:37Solo Mining
- 11:49Proportional Mining
- 13:38Risk Aversion
- 21:57Model
- 25:11Active Miners
- 30:03Optimal Fees
- 35:45Conclusion
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