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Mining Pool Centralization Tackled by Matt Corallo’s Bitcoin Improvement Proposal (BIP)

Mining Pool Centralization Tackled by Matt Corallo’s Bitcoin Improvement Proposal (BIP)

Matt Corallo’s Bitcoin Improvement Proposal

The Bitcoin Improvement Proposal is the means through which changes to the Bitcoin protocol are made. In the beginning, it was mostly Satoshi Nakamoto, the creator of Bitcoin, who handled all the changes that had to be made to the protocol. These days, any proposal to effect change in the protocol would have to achieve consensus or be widely accepted by the users of the network. These proposals that are used to address controversies and challenges in the Bitcoin community are known as Bitcoin Improvement Proposals (BIP). Using the same process of bringing about change, Matt Corallo is trying to address a serious problem with the way mining pools are organized.

In his proposal, Matt stripped bare the issue of mining pool centralization. This is a problem that has been cited by many as one factor that contradicts the decentralized nature of the Bitcoin network.

Pool Mining and Stratum’s Drawback

Mining pools for some time have been the umbrellas that host small-scale miners who do not have the computational power to survive the computing competition in the Bitcoin mining process. Since the introduction of ASICs, mining with devices that have low computational power has become uneconomical and impractical. Hence, pooled mining systems have been the solution for miners with smaller computational power. Even miners with a couple of specialized miners would be better off joining large mining pools.

Stratum is one mining software, designed to suit the complicated processes of allotting mining tasks to members of a pool. However, according to Matt’s proposal, this software’s architecture gives undue control of task sharing and payment control to pool operators. Hence, increasing the chances for censorship on the network. A good example is when pool operators use their influence to restrict protocol upgrades.

In a bid to fight these centralizing factors, some miners are left with the option of going solo. However, due to the insufficient computational power that comes with going solo, a steady income is not guaranteed. This means such operators would have problems when it comes to paying the bills that come with powering and managing their small mines.

Betterhash, a Better Solution for Decentralized Pool Mining

With the Betterhash protocol suggested by Matt Corallo, the autonomy of the participants of a pooled-mining network is achieved. This is done by splitting the mining operation into two parts.

These two processes are work-information and pool payout information, which are split into two separate channels. Hence, a different protocol called the work-carrying protocol processes the work information, which would have been executed by Stratum. The pool payment protocol would then handle communication with clients.

Practical Benefits of Matt’s Betterhash

This splitting of operations, allows pool participants to control the creation of block templates with transactions of their choosing, rather than the one given to them by their pool operators. With Stratum, pool participants had to rely on pool operators to handle that task. An advantage of the split is that miners in a pool get to enjoy some of the benefits of solo mining without the income fluctuation that comes with it. They remain in a pool and still have some control.

This change in the Stratum protocol would increase the collective performance of pooled mining. Above all, censorship would be controlled and some level of mining autonomy for pool participants would be maintained. This gives room for smooth transitions to new consensus rules.

According to Matt, this change does not have to be a total re-coding of the Stratum protocol, since it only seeks to upgrade the functionality of the protocol. However, he suggests that a complete rewriting of the code would not be a bad idea.

Conclusion

While this BIP is only a few weeks old, some people have shared contradicting views of Matt’s proposition, and some think the code to this proposition needs an in-depth review. However, many folks think that his idea is a great one.

At the moment, this is still a proposition, which might be accepted or not. Members of the community are still sharing their views and deliberating on the proposal.