Smart Contract-Based Decentralized Mining Pools for Proof-of- Work Blockchains

Abstract

Mining pools have gained wide attention allowing in-dividual miners, who contribute their computational resources to collectively mine blocks to be rewarded more predictably. Although (traditional) mining pools make the mining process more predictable and incentivize small miners to participate, they introduce centralization and miners need to trust the pool manager that the revenues would be fairly shared among members. Efforts to create decentralized mining pools have been reported in the literature. Nonetheless, the aforementioned schemes have not been widely adopted and are not currently in use, mostly due to their scalability issues and the probabilistic nature of their share validation algorithms, which may result in potential security problems, as only a random subset of shares is chosen for validation. Our solution aims to create an efficient scheme for decentralized mining pools for Proof-of- Work (PoW) blockchains by leveraging Ethereum smart contracts to share mining rewards accordingly, while also utilizing the InterPlanetary File System (IPFS) to minimize gas fees by storing only the necessary information in the smart contract.