Smoothening block rewards: How much should miners pay for mining pools?

• URL: http://arxiv.org/abs/2309.02297v1
• Date: Tue, 5 Sep 2023 14:59:01 GMT
• Title: Smoothening block rewards: How much should miners pay for mining pools?
• Authors: Axel Cortes-Cubero, Juan P. Madrigal-Cianci, Kiran Karra, Zixuan Zhang,
• Abstract summary: We quantify the economic advantage for a given miner of having smooth rewards. We use this to define a maximum percentage of rewards that a miner should be willing to pay for the mining pool services.
• Score: 11.245119287096419
• License: http://creativecommons.org/licenses/by-nc-sa/4.0/
• Abstract: The rewards a blockchain miner earns vary with time. Most of the time is spent mining without receiving any rewards, and only occasionally the miner wins a block and earns a reward. Mining pools smoothen the stochastic flow of rewards, and in the ideal case, provide a steady flow of rewards over time. Smooth block rewards allow miners to choose an optimal mining power growth strategy that will result in a higher reward yield for a given investment. We quantify the economic advantage for a given miner of having smooth rewards, and use this to define a maximum percentage of rewards that a miner should be willing to pay for the mining pool services.

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