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Guest Post – Nithronium – Pond Mining: Crypto’s Bright Future (part 2)

Today we can share another great article with you: Osman Kuzucu aka Nithronium will tell us about Pond Mining. As mentioned in a previous article he is working on a CryptoNote improvement that will allow for decentralized mining pools in an unprecedented way. His earlier article already set the scene for what he’s about to write now.


Reclaiming decentralization

In Part One I have mentioned that the current state of crypto mining is far from decentralized. If we look at the numbers even only for Bitcoin, we will see that right now 80% of the network’s hashing power is coming from only 6 different sources. Which means that even though there are many different miners out there, the actual main chain doesn’t have any diversification. And that is just Bitcoin. Almost all other alt coins have the same problem and I believe that is against the idea of having a decentralized cryptocurrency. We didn’t come up with blockchain based cryptocurrency just to transfer valuable assets digitally, but we came up with it to avoid a central authority for our valuable assets. However, we now know that -in the case of Bitcoin- the network is controlled by just 10-12 different wallet addresses; they are the block generators on the main network. This same problematic situation also occurs in real life, e.g. in democratic societies. People are usually voting for the political parties in stead of contributing to the governance individually. We vote for a party in stead of a person, we vote for a person in stead of an idea if we’re lucky. We do not have a chance to vote for what we want so we are forced to make suboptimal decisions.

This problem got me thinking for a long time until someone mentioned a project called Nerva. I saw that there are people in that community who are aware of the issues and are trying to solve the problem by being pool-resistant, and CPU only. Now I know that there is no such thing as being pool-proof (at least for now) but even trying to being pool resistant was a huge thing for me. So I wanted to be a part of this movement and started sharing my feelings about the current state everywhere. One day someone came up with an idea of having a way of mining together but without requiring a central authority. When I heard this, I was like “YES” because I know that the problem is not people mining together and dividing the reward, the problem is people doing that by trusting a third party or operator. Even though they (traditional pool miners) share the reward, on the actual blockchain, the reward goes to one wallet only and no one other than the pool operator knows how much work each individual miner contributed. That is the main problem of centralized mining and that is the main driving force of the Pond Mining Network.

The proposed protocol for Pond Mining Network is actually no different than pool mining, in terms of determining each individual miner’s work. However, the payment distribution scheme requires no central authority and no trust factor. This allows miners to mine together and share the reward fairly while not causing any centralization issues. Since the reward distribution has no operator and individual miners are not redirecting their hashrate to some third party entitiy’s wallet address, we reclaim the title “decentralized” again with Pond Mining Network.

Not done before

The idea is not brand new. When centralization problem first became obvious, early developers of Bitcoin ecosystem came up with a solution, P2Pool. I will not go into too much detail here but the main approach is to hash for the main network, as solo miners do, while including other miners’ wallet addresses in the coinbase transaction. So when a share is submitted to the P2Pool, each miner gets to know about the share-submitter miner’s work and they include that miner on their coinbase transaction as well. If a share on this chain is in the main network’s difficulty range, the share is broadcast to the main network and every miner will be paid directly without requiring a central authority. However, this solution has different problems and is not suitable for every miner on the network. What’s worse, if the pool can not find a block for a long time then earlier miners would not be getting their rewards fairly.

Now, with the Pond Mining Network, we are going to have a standalone client that would easily be implemented to work with any PoW blockchain project. The client will have its own P2P network that will keep the mining state decentralized while the network will consist of different P2Pools with different set rules. This means that an  individual miner will have different P2Pool options to mine on and they will make sure they are getting paid fairly. We will also introduce new concepts to the P2Pool solution, such as IP block or minimum share requirement for being included on the coinbase transaction. We are currently working on the architecture of such a client and hopefully we will soon be able to launch Pond Network Client as an open source standalone executable.

We know that Pond Mining Network will not be a solution for 51% attacks on the network. It will, however, allow individuals to get frequent rewards for their work while avoiding centralization of the blockchain. At this point, though, we really need people to understand how pool mining’s current state is centralizing the PoW blockchain networks and why they should avoid pool mining. Hopefully, once we have the executable ready to go with different blockchain projects supporting us, we can bring decentralization back to the blockchain.