Scaling Noncustodial Mining Payouts with CTV

These pools are categorized into custodial and non-custodial based on their method of handling mining rewards. Custodial pools consolidate rewards into a single wallet before distribution, as evidenced by transactions showing a large initial transaction followed by distributions. Non-custodial pools, however, distribute rewards directly to miners' wallets, avoiding the consolidation step and not holding funds at any point. The Ocean mining pool is highlighted for its non-custodial operations, although it faces challenges due to firmware restrictions from popular mining hardware like Antminer, which limits the number of outputs in a coinbase transaction. Open source ASIC firmware, such as Bitaxe's ESP-miner, is shown to overcome these limitations by allowing for larger transactions.

The potential of CheckTemplateVerify (CTV) as a Bitcoin protocol enhancement is discussed for its ability to facilitate the distribution of rewards without being hindered by firmware output limits. This is achieved through a consensus-enforced commitment in the coinbase transaction that expands into a larger transaction. Despite its advantages, CTV introduces complexities such as additional transactions to claim rewards. Initial experiments with CTV have focused on designs that prioritize usability and cost-effectiveness.

Exploring innovative solutions to reduce transaction costs in blockchain technology, Ark's use alongside transaction trees presents an efficient method for small miners to consolidate numerous small Unspent Transaction Outputs (UTXOs) into a singular, substantial UTXO. This process significantly lowers the cost associated with managing tiny outputs, highlighting a promising avenue for enhancing economic viability for small-scale participants within the cryptocurrency mining ecosystem.

The discussion also critiques the proposed scheme for scaling non-custodial mining payouts, suggesting that increasing block space usage for these payouts under normal fee conditions would not effectively scale nor maximize fee revenues. Instead, utilizing Ark for payouts could offer a more scalable solution by potentially reducing the average block space required for these transactions. The integration of Covenants Transaction (CTV) technology facilitates non-interactive Ark payouts, eliminating the need for pre-signing by the pool coordinator with each miner, thereby improving efficiency and practicability of mining pool payouts.

A recent presentation at the btc++ conference shed light on the significant challenges faced by Ocean in executing noncustodial fanout transactions, primarily due to firmware restrictions imposed by Antminer. Efforts to navigate these constraints include complex strategies such as hardware fingerprinting and managing multiple work templates. Innovations aimed at mitigating these challenges include the development of Coinbase Playground, showcasing potential solutions to overcome the limitations without requiring alternative hardware.

The exploration of Ark's potential to revolutionize mining pool payouts through OP_CTV highlights how transaction trees can streamline the process, making it more efficient and cost-effective. Meanwhile, discussions around congestion control in blockchain networks compare approaches like the Lightning Network to innovative methods such as employing zero-fee transactions within block templates, indicating ongoing efforts to optimize blockchain technology for better performance and scalability.

The complexity of decentralized consensus mechanisms in reward distribution is addressed, mentioning projects like p2pool and braidpool that seek to find compromises in this challenging aspect of cryptocurrency mining. The conversation underscores the importance of exploring decentralized approaches to validating mining efforts and distributing rewards, despite the operational challenges involved.

Lastly, the preference among hashers for decentralizing mining, even if it means accepting slightly lower fees, suggests a significant portion of the community values self-sovereignty over higher rewards. This perspective emphasizes the diverse priorities within the mining community, highlighting the need for solutions that cater to varying preferences regarding custody and fee structures.