Trends and Behaviour of Miners in Cryptocurrency Networks: A Longitudinal Study on Fairness, Centralization and Churning

Abstract

The distributed ledger systems rely heavily on miners, who are a vital component of the cryptocurrency ecosystem. Most cryptocurrencies cease to exist within five years of operation [1] due to churning. Most current cryptocurrency analyses in the literature focus on mining pools and ignore the individual miners’ perspective and in-depth analysis of the churning phenomenon and its possible reasons. In this study, we conducted a longitudinal and overall study on two of the most growing cryptocurrency networks, namely Bitcoin and Ethereum. The Bitcoin dataset used spans over 12 years (2009-2021). Whereas the Ethereum dataset spans over 8 years (2015-2023), including the two versions of Ethereum (before and after the merge). Our goal is to uncover the factors that drive miners’ churning and reveal essential characteristics of cryptocurrency mining, such as network fairness and centrality. Generally, both networks experience a decline in active miners over time. Our results confirm the centrality of the Bitcoin and Ethereum networks, whereas Bitcoin is found to be more distributed and fairer than Ethereum in both versions. Also, in Bitcoin, solo miners are less centralized and experience a fairer distribution of blocks formation than pool miners, however, pool miners have more mining rewards on average. Also, pools are found to decrease churning for pool miners compared to solo miners. Moreover, it is found that miners’ waiting time is a significant factor in miners’ churning. The existing protocols used require improvements to increase network decentralization and fairness, as well as reduce miners’ churn.