With the continuous development of the blockchain world, the mining scale is becoming larger and larger, and the difficulty is also higher and higher. The SOLO mining mode of the early traditional small miners withdrew from the market and replaced by a mine pool integrated with distributed miner’s computing power: some scattered miners entrust the mineral computing power to professional institutions for management, and regularly settle the mining income. The emergence of the mine pool was once questioned by many decentralised fundamentalists. However, when we fully understand the significance of bifurcation, these doubts will not be over. We will write an article on bifurcation in the future.
Although the concern of decentralization has been dispelled, another problem of the mine pool has not been discussed: the external incentive against the interests of miners! This will become more and more important in Ethereum.
The so-called external incentive is the concept corresponding to the internal incentive. Before discussing this concept, the relationship between the miner and the mine pool is clear: This is a very clear principal-agent relationship in the traditional legal system, the miner is the principal, and the mine pool is the agent. In the principal-agent relationship, the agent should maximize the interests of the principal within the scope of the agreement, and can not use the agency to do any interest transfer or maximize their own interests (but not the principal’s interests). Although this principle is clear, it is difficult to implement it. It needs some mechanism design to solve the problem of incentive compatibility: the maximization of the agent’s own interests is consistent with the maximization of the principal’s interests.
Based on the principal-agent relationship, we will discuss the internal incentive and external incentive. The so-called internal incentive refers to the value target and its distribution within the scope of the contract agreed by both parties. In terms of mining, the internal incentive is to maximize the mining revenue, including the ETH obtained from mining and the ETH obtained from package trading. Because the general mining pool obtains a certain proportion of the total mining income, this contract arrangement is theoretically incentive compatible, that is, the mine pool can maximize its own interests only by maximizing the interests of miners, or it will naturally maximize the interests of miners. This is the compatibility of internal incentives that we have analyzed at present.
However, in Ethereum, the situation may change, and this change is the emergence of DeFi.
We mentioned in the previous article on miners’ risks that although miners cannot change transactions, there is the possibility of selective packaging transactions. The earlier the package is, or only one transaction is packed, the greater the profit will be.
At this time, it is possible for the mine pool to make use of its own computing power to arrange related party transactions. However, this arrangement does not completely damage the interests of the miners, because the miners will still get the maximum mining income or a little lower mining income, that is, the mine pool perfectly implements the internal incentive, but obtains other benefits in the DeFi through the package transaction arrangement. This part of the income is not agreed in the contract of miners, or even can not be agreed, which is external incentive.
Recently, it is often mentioned that the word “front-running“, that is, the above-mentioned miner preemptively arranges a transaction package, which has been regarded as a risk by the DeFi industry, and the mine pool is the most likely to take advantage of this advantage. How to determine the ownership of the profits if the mine pool has obtained profits as a result? As I mentioned earlier, there is a traditional principal-agent relationship between the mine pool and the miners, and the income should belong to the miners in a strict sense! The problem now is that if the mine pool does not disclose its packaging strategy, no one can infer whether the ore pool has obtained external incentives based on the data on the chain, and the miners can not prove it! There is a black hole of trust.
However, if the strategy of the mine pool is disclosed and strictly implemented, it can avoid the problem of external incentive, but it is easy to be targeted by some malicious attackers. For example, the strategy of blocking attack is very clear, or in turn, the benefit of external incentive is snatched by the attacker (indicating that the design of downstream DeFi should avoid the architecture similar to front running), and even other more serious attacks Hit the solution, so that the chain application developers can not defend.
In this way, there is a pair of contradictions in the mine pool: open strategy — attack, non disclosure strategy — trust black hole.
We propose a reasonable mine pool architecture: open random strategy.
According to the effectiveness of internal incentive, several reasonable packaging strategies are designed and disclosed. These strategies are to maximize the interests of miners, and the difference is the order or combination of packaging. Then, based on some hardware random sources and software random algorithms, they are combined into a hybrid strategy (strategy set of probability distribution), and the original data of random sources are saved for verification by miners at any time. This scheme makes it impossible for attackers to capture the packing strategy effectively, and for all miners, it greatly reduces the possibility of external incentive for the mine pool, that is, it fills the trust black hole. Of course, if the mine pool does not strictly implement this process, it can still force profits, then the evidence and supervision can be used.
Because the mine pool is completely in line with the traditional legal system, the theoretical basis of its supervision is very sufficient. In the future, it must be the most sensitive module of the public chain system, and also the module that is most easily included in the supervision. This is the necessity of the orderly development of the whole public chain. We believe that the structure of the mine pool proposed by us will appear sooner or later.