Bitcoin mining as cooperative network
Pol, W.R. van der
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Nowadays, cryptocurrencies are thriving. Due to the enormous growth of the Bitcoin Network, it was getting harder for miners to obtain Bitcoins and maintain a steady income. Therefore, mining pools were founded. Multiple miners combined their computational power and divided the rewards proportionally or by pay-per-share. In this thesis we will focus on the proportional distribution according to the computational power of each miner and analyse if there exists a way to optimally divide the pro?ts among the miners. We will mold the Bitcoin network to a model of cooperative games with coalitional structures. The examination of the distribution within the pools led to a surprising conclusion: under certain conditions the DMS-CS-core will always be empty. When the partition function is constant-sum, monotonic and nonlinear with respect to the computational power, there exists no imputation which will satisfy each miner. In other words: there will always be an incentive for at least one miner to switch pools. It turns out that the delay of communication within a pool is crucial in this case. When the delay is below certain boundaries, the three beforementioned conditions will always apply, meaning the DMS-CS-core will always be empty. Thus, under certain conditions the network will never stabilize.