Current mining pools can be forced into censoring transactions and their opaque accounting limits their use for building financial tools that can help miners manage their business risks. This post briefly discusses the limitations of centralised mining pools and provides motivation to build Braidpool.
If the only mining pools are like today’s centralised mining pools, a censor has a straight forward path to censor transactions.
When a censor wants to censor some transactions, it reaches out to centralised pool operators and forces them to exclude censored transactions from their blocks.
One way to resist this censorship is for the transaction author to keep increasing the fees on the transaction until some miner picks up the transaction at the risk of being targeted by the censor. See Censorship Resistance Property.
Stratum v2 allows miners to build their own blocks and therefore a censor can not directly ask a centralised pool operator to censor transactions. However, the censor can still force the pool operators to refuse payouts to miners for blocks that include a censored transaction.
Braidpool is designed to resist such censorship attacks. Read the full proposal under review for details.
Miners and market makers have shown an interest in developing a market of hashrate futures contracts. Using such contracts, miners manage risk and market makers earn revenue while helping the Bitcoin mining industry.
Building a futures contracts market across mining pools faces the problem of trusting the pool operators to honestly report their hashrate at all times.
With Braidpool the hashrate is published on a global peer to peer network. The published record is the same verified record that Braidpool uses to compute rewards for miners. Market makers can use the same record to create futures contracts that pay miners in exchange of verified proof of work.
Braidpool is also developing solutions for miners to deliver hashrate to market makers such that the hashrate can only be traded once. Such tools are simply not possible to build on current centralised pools.
Some of the current mining pools publish Hashrate contracts (e.g. poolin) that can be bought to earn a yield based on the pool’s hashrate.
Anyone who buys these hashrate certificates representing a fixed amount of hashrate on the pool can earn payouts as the mining pool earns mining rewards.
The problem is again, the lack of transparency on the accounting and the need to trust the centralised pools to publish their hashrate accounts.
With Braidpool, all the hash rate of participating miners is transparently visible to anyone. This enables building Hashrate contracts that don’t need a trusted pool operator.