Further decentralization of mining pools with Stratum V2

A common criticism is that Bitcoin mining is too centralized around the mining pools. That is why Braiins, the company behind the mining pool Slush Pool, is working on an improved version of the Stratum protocol. Stratum V2 improves the decentralization of mining pools by returning power to the miners.

On average, miners find a new block to add to the bitcoin blockchain every ten minutes. The lucky miner who finds a block receives a miner’s reward of (currently) 12.5 BTC. Not bad! But what if you’re not the one who finds the next block? Then you get nothing. That does not make the life of a miner who tries to mine on his own any easier.

That is why many Bitcoin miners mine through so-called mining pools . In it, the miners join forces to jointly compete for the miner’s reward. When one of the connected miners finds the next block, the mining pool divides the reward among all participants according to the amount of computing power they have contributed. Many mining pools use the Stratum protocol for this.

Such a mining pool is very useful for miners because it gives them more security. Instead of receiving a large payout every once in a while, they are paid much more regularly at a mining pool. Sometimes several times a day.

However, it also caused the mining process to become in some way centralized around the mining pools. Miners appeared to have a tendency to join larger mining pools. Due to their high user numbers, they find a new block more often than a smaller mining pool and can therefore pay out more regularly.

The four largest mining pools have now grown so large that they collectively have more than 50% of the network’s computing power. And that is a security risk that many people see as a problem. After all, the mining process is precisely intended to keep Bitcoin decentralized.

The graph shows the current distribution of computing power among bitcoin mining pools. Source: XBT.eu

However, mining pools act as a kind of intermediary in the mining process and therefore have a big say in the matter. They decide for the entire mining pool which transactions are added to a block and they can therefore also choose not to include certain transactions.

Moreover, it is the mining pool that gives a so-called ‘ version bit ‘ to a block. This is very important for soft fork upgrades, such as the activation of SegWit in 2017. Miners indicate whether they support a fork or not via the version bit. At the moment, however, it is the manager of the mining pool who decides for all connected miners whether or not a fork is supported.

According to many, the power of mining pools and their managers is too great. Braiins, the company behind Slush Pool, is therefore working on an improved version of the Stratum protocol: Stratum V2.

In the new Stratum V2, the protocol is turned upside down and power is returned to the individual miners. In this new version, instead of the mining pools, it is the miners who select the transactions, add a version bit and initiate the next block.

This is inspired by Matt Corallo’s BetterHash proposal which works in a similar way. There is no bad blood between the two projects. Corallo even lent his aid to the Braiins team to help them with some complex problems.

In addition to improved decentralization, Stratum V2 also includes a number of other upgrades. Such as encryption of the data between the mining pool and miner to prevent a ‘ man-in-the-middle ‘ attack from hijacking the signal and running off with it.

In addition, the efficiency of the protocol has been improved in Stratum V2, and more types of data can be exchanged (such as temperature, voltages and other information) between miners and mining pools. There is more to come, but the Braiins team does not want to say anything about that yet.

The specifications of the new Stratum V2 protocol are therefore not yet completely fixed. The team says it will wait for additional feedback, after which they will probably activate the protocol on Slush Pool for a while as a test. Only then will it be made available to other mining pools. Sometime in August, Braiins hopes to announce the final specifications via a Bitcoin Improvement Proposal (BIP).

Want to read more about further decentralization of the mining process? Also read about Matt Corallo’s BetterHash protocol.

: Marco Verch, Creative commons 2.0 license

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