Hey everyone, I’ve got a question for those of you who are more into the tech side of things (I’m coming from an economics angle). So, here’s what I’ve gathered (correct me if I’m mistaken): mining works by constantly running the hashing algorithm until someone finds the right number, and that miner gets the reward. When you’re part of a pool, you share the risk of not finding that reward by splitting the BTC when a miner in the pool hits it. From an economic standpoint, this raises concerns because smaller pools end up swapping risk without seeing any boost in expected reward. Naturally, people will lean toward safer, larger pools for steadier income while still keeping the expected reward intact, which makes total sense economically. Is there a way to design a mining protocol that would make collaborating in a pool a bit more expensive? Not a huge cost, but just enough to create a trade-off for risk tolerance.
This could be something straightforward like a built-in fee that adjusts based on the number of miner addresses in the pool, or maybe a completely different approach to Bitcoin mining. I’m sure any proposed design would have its downsides, but I’m just curious if there have been any past ideas, discussions, or initiatives aimed at making small pool mining more viable without compromising Bitcoin's core integrity.
re the 1st post: Then you need to delete the original post as dupes are not allowed on the Forum... In the future you can also just move the post vs making another & deleting the 1st one.
That out of the way, you are missing the fact that statistically speaking in the long term, earnings from a 'small' pool *should* equal your earnings from a large pool. We are talking over at least 1 year here which will give the small pool time to find 1 or 2 blocks to give you a much larger % of the rewards + fees from those blocks vs the very tiny % per-block you earn on the large pools.
That said, I'm sure that there is a knee at some point in how small the pool can be before things tilt more towards the large pools.
Unfortunately, that's entirely at the pool's software side.
As far as the Bitcoin network is concerned; how miners and pools work to find a valid hash isn't important
Because nodes only need to verify if the newly broadcasted block is valid, e.g.: its block header's SHA256d hash is lower than the target, etc.
The network doesn't know if it's from a pool with 15 miners, a huge pool with 1000 miners or a solo miner
aside from "hints" in the coinbase transaction that the miner/pool may include of their own accord.
You have to take luck into account too. Mining in a small pool, if it has lucky blocks, can be extremely profitable for small miners. As the reward is divided in proportion to the hashrate over a given period, if a small pool has a string of lucky blocks, this can be good, even if we know that in the long term, luck always tends to be closer to 100% of course. It's almost a form of gambling; some did it with mmpool before it (probably) exited scam, others with kano pool or Laurentia pool for example.
So you're right, most of people want limited risk, but some consider the said risk goes both ways, not to mention those who want to support good projects for Bitcoin as a whole.
There are costs-- beyond the health impact to the network, pools charge a fee, and it is extremely easy for pools to steal from miners and for miners to withholding attack the pools.