Fee Selection for CTV-Based Mining Pool Fanouts

The discussion revolves around an innovative approach to ecash payouts for small miners, highlighting a proposed system that could potentially alter how payouts are managed in mining pools. The concept is still in the ideation phase but envisions a setup where a pool operator sets a limit (denoted as N) on the number of payouts included directly in the coinbase transaction. This would comprise the largest N-1 balances, with the Nth output being redirected to an ecash mint, which is responsible for distributing the payouts to all miners falling below the preset threshold. This structure is somewhat similar to the operational mechanism of Ocean, except that it transitions the custodial balance responsibilities to an ecash mint.

This redesigned payout mechanism aims to address several issues inherent in current systems. By segregating individual miner payouts, it effectively mitigates risks associated with dust attacks. However, this system still necessitates miners to interact with the blockchain to access their funds, which might not be feasible for smaller payouts due to disproportionate transaction fees. In scenarios where the transaction output is lesser than the on-chain fees, miners face the predicament of either accumulating a substantial balance before initiating an on-chain transaction or forfeiting a significant portion of their earnings to fees. The proposed solution also explores the potential use of an ark service provider instead of a mint, aiming to reduce trust dependencies albeit at an increased cost, especially noted in a post-quantum context where fee structures are expected to rise significantly.

The underlying challenge, however, remains with the fundamental limitations of blockchain technology concerning small-scale miners. The dependency on custodial solutions appears inevitable for smaller participants who lack the financial clout to maintain off-chain transactions economically. The long-term vision suggested includes fostering the adoption of trustless off-chain exchanges, allowing miners to earn and spend their proceeds without needing to transfer them back on-chain. This scenario optimistically anticipates a shift towards more decentralized financial practices, although the realization of such a framework faces significant technical and economic hurdles.