P2share: how to turn any network (or testnet!) into a bitcoin miner

The discussion centers around the concept of a total discount factor d, which is crucial for pricing shares in a mining protocol. This factor is divided into two components: d_time and d_params. The former relates to the time-value-of-money, emphasizing that assets available now are more valuable than those expected to be available later due to the unavoidable passage of time. The latter involves protocol-specific constraints like PPLNS window size and share expiry. Ideally, achieving a discount factor (d) of 1.0 would indicate a perfect market condition where large miners and market makers would pay full price for shares from smaller shareholders. However, this is challenging to achieve in practice, especially with d_time likely never reaching 1.0 due to intrinsic time-value considerations.

The email suggests reevaluating the protocol's design to better align incentives across shareholders. It critiques the current model, where the top 20 shareholders receive 100% of the mainchain reward, potentially without purchasing shares from smaller miners. This setup risks significant losses for participants who cannot become one of the top 20 before the PPLNS window closes. An ideal system would allocate a proportional percentage of the mainchain bitcoin reward to the top 20 shareholders based on their share percentage (q%), with the remainder paid out to the lesser shareholders through an off-chain mechanism. However, implementing such a model faces obstacles, including the need for mainchain covenants and custodial mechanisms, which the sender deems currently unfeasible.

Furthermore, the email proposes exploring alternative designs that do not require changes to the main Bitcoin blockchain or custodial solutions. These include strategies like randomly selecting shareholders for payouts, allowing non-expiring shares, and using an unbounded PPLNS window. Such approaches aim to create a fairer distribution model that still maximizes marketability and remains non-custodial.

Additionally, there's a reflection on the payout process within the p2share model, where selected shareholders have their shares destroyed upon receiving a payout. This method contrasts with a profit distribution approach and raises questions about handling scenarios where a selected shareholder does not have enough shares to sell back. The conversation also touches on the complexities of accurately reflecting market depth within the sharechain and the challenges of maintaining a lean block space footprint, suggesting that further exploration and innovation are needed to refine these models.