Bitcoin: a new proof-of-work system with reduced variance

Danilo Bazzanella () and Andrea Gangemi ()
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Danilo Bazzanella: Politecnico di Torino
Andrea Gangemi: Politecnico di Torino

Financial Innovation, 2023, vol. 9, issue 1, 1-14

Abstract: Abstract Since its inception, bitcoin has used the popular consensus protocol proof-of-work (PoW). PoW has a well-known flaw: it distributes all rewards to a single miner (or pool) who inserts a new block. Consequently, the variance of rewards and the mining enterprise risk are extremely high. In 2016, Shi proposed addressing this problem with a theoretical algorithm. We introduce an easily-implemented PoW variant that improves Shi’s idea. The network must not find a single nonce but a few to insert a block. This simple change allows for a fairer distribution of rewards and also has the effect of regularizing the insertion time of blocks. This method would facilitate the emergence of small pools or autonomous miners.

Keywords: Proof-of-work; Bitcoin; Consensus protocol (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1186/s40854-023-00505-2

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