An Onchain Implementation Of Mining Feerate Futures

An Onchain Implementation Of Mining Feerate Futures

Original Postby ajtowns

Posted on: February 19, 2024 09:40 UTC

In the realm of cryptocurrency mining, there's an intriguing dynamic at play when it comes to how miners with a significant share of the network's total hashrate approach transaction mining.

A common assumption is that such miners might opt to bypass mining a particular transaction within a given block, betting on their substantial hashrate to secure that transaction in a subsequent block they mine. This strategy raises concerns about the potential for increased centralization in mining, as it seemingly offers an edge to larger miners over their smaller counterparts, potentially making them more profitable.

However, this perspective might not fully capture the nuances of the situation. When a miner chooses to mine a transaction with a lower fee rate (referred to as a "miner tx") before its expiration, and in doing so leaves behind transactions with higher fee rates in the mempool, it inadvertently elevates the fees available for the next block. This scenario doesn't exclusively benefit large miners but extends an advantage to miners with lower hashrates as well. These smaller miners stand to gain from the occurrence of sporadically high fee-rate transactions without having to bear the initial cost of mining a low fee-rate transaction.

Thus, while there's an undeniable incentive for larger miners to adopt strategies that differ from those of their smaller peers, the benefits of such approaches are not monopolized by them. The distinction in strategy does indeed create diverse impacts across miners of varying sizes, but it does so in a manner that provides equal opportunities for future block rewards, irrespective of the miner's participation in the strategy or their overall hashrate. This insight suggests a more complex interplay between miner size, transaction selection strategies, and profitability, challenging the straightforward notion that larger miners inherently gain at the expense of smaller ones in every scenario.