How BTC Pools Are Built & Grown Over Time

The 21st century has got its fair share of advantages and issues as well. Intermixing globalization and localization have in some sense made the functioning of a process more complex and subtle too. Financial transactions in a way back in the day (18th, 19th century) used to comparatively simple and straight-forward. But the drawback of that was almost anyone could employ it unfairly. In the present day, with financial transactions happening mostly digitally and becoming even more upgraded by employing decentralized platforms and applications, the issue of some third-party/individual misusing decreases exponentially. After just two years of Bitcoin entering the market, the popularity around it became huge. It’s around that time that miners started utilizing GPU (graphic processing unit) enabled computers. Utilizing such a machine meant a lot of money to be used as well. Some miners could afford it while some couldn’t. It is due to this factor (among others) that specific pools started being formed by miners who weren’t able to afford such high-powered computational machines. This piece delves into Bitcoin pools; how they were built and how they have grown since inception.

Bitcoin pooling in layman words could be perceived as a double-edged sword. On one hand, decentralization assists in making every node in the grid responsible and accountable which majorly used to be an issue in an authoritative network (authority neglecting one’s responsibility), but simultaneously it is experienced as a hurdle by many for similar reasons only.

This piece of research showcases that broadly speaking, pooled mining principles encompass share agreement and reward functions. Share agreement indicates that each member in the pool works together with other members to mine a fresh block and share mining revenue when one of them successfully mines a new block. Doing so allows members in the network to have relatively stable mining rewards. While the reward function indicates categorizing mining rewards through a pool operator. As one could see in the infographic below, the data were categorized as historical transaction data and unconfirmed transaction data.

Two databases were built namely DB1 and DB2 where transactions storing and filtering took place. As this the Bitcoin pooling process is still in its early phase, 3 issues were seen. Firstly, there existed inconsistent system clocks of transactions (blocks) creators. Consistent machine system clock was utilized to overcome the first hurdle. The second issue experienced was inconsistency in data collection frequency. To overcome the issue, data was queried every two seconds. Lastly, the loophole experienced was of data loss. Few reasons were found for the data loss like network congestion; temporary loss of connection via remote servers, etc. In the end, one may conclude that there are a couple of issues facing the pooling process like the Prisoner’s Dilemma and Malthusian trap.

One angle of perceiving mining pools is that groups are formed by miners (which are referred to as pools) where collective resourced and information are employed for generating an intensifier hashing power. The chances of resolving a block increases as block/s getting resolved and computational resources are directly proportional. To know more about the unique distribution of hash power, have a look at figure 3.5 in this piece of research.

As more prototypes will be built and tested, pooling across bitcoin will certainly grow in time. The only question would be how long will it take. There’s no precise or exact solution at the moment. It depends on various factors within the technology industry and other industries in almost every nation across the world.

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