Scaling Noncustodial Mining Payouts with CTV

In the exploration of advanced blockchain mechanisms, particularly regarding payout distributions within mining pools, a significant emphasis is placed on optimizing fee revenue while accommodating pool participants' preferences for fee payments. The traditional method of including payouts directly in the block presents a notable drawback: it potentially reduces the fee revenue available from the blockspace. This reduction is especially pronounced when dealing with large numbers of pool participants, as the direct inclusion of payouts essentially allocates part of the otherwise revenue-generating blockspace to these transactions.

An alternative approach involves the use of Covenants Transaction Outputs (CTV) for managing payouts. This method stands out for its ability to preserve maximum fee revenue at the time of transaction. It achieves this by not immediately allocating blockspace for payouts, thereby not diminishing the fee revenue that could be generated from the space. Additionally, CTV payouts offer a strategic advantage by granting each pool participant the autonomy to decide on the specifics of their fee payments. This includes determining the amount they are willing to pay and selecting the timing for receiving their payout.

Such a mechanism introduces flexibility and efficiency into the process of handling payouts within mining pools. By leveraging CTV, pools can ensure that the immediate financial benefits of blockspace are not compromised, while also providing participants with the freedom to manage their transactions in a manner that aligns with their individual preferences and financial strategies. This approach underscores a thoughtful consideration of both the economic dynamics at play within blockchain ecosystems and the diverse needs of pool participants.