Exponentially Distributed Nonlinear Proof-of-Work: Saving Energy while Preserving Decentralisation in Bitcoin Mining

Abstract

Bitcoin is one of the most prominent blockchain systems but is infamous for its massive energy consumption. The proof-of-work (PoW) consensus algorithm used for appending transactions to the Bitcoin ledger (also known as Bitcoin mining) incurs substantial energy expenditure due to the energy-intensive nature of PoW. The root of this inefficiency lies in the current implementation of the PoW algorithm. PoW establishes a linear relationship between a miner's computational power and their probability of successfully mining a block by assigning an identical cryptographic puzzle to all miners. This paper investigates the energy inefficiency inherent in PoW mining by exploring the potential benefits of introducing a nonlinear probability of success based on a miner's computational power. This nonlinear proof-of-work (nlPoW) algorithm reduces energy consumption without compromising the decentralised nature of Bitcoin. This study formulates four distinct nlPoW algorithms through a meticulous design science approach by deducing requisite algorithmic specifications and structures. Rigorous statistical simulations are employed to assess the performance of nlPoW against conventional PoW within the Bitcoin mining process. Preliminary outcomes obtained from simulating a sizable network of miners, each possessing equivalent computational power, demonstrate that nlPoW effectively curtails the hash computations required during Bitcoin mining. nlPoW achieves energy efficiency enhancements without compromising the decentralised consensus model or substituting energy consumption with alternate resources, a trade-off often observed in prior attempts to mitigate the energy challenge associated with PoW.