Difficulty Scaling in Proof of Work for Decentralized Problem Solving

TL;DR

DIPS modifies Bitcoin's proof-of-work to incentivize solving scientific optimization problems, reducing energy waste by redirecting computational effort towards scientific computation without compromising decentralization.

Contribution

Introduces a novel difficulty adjustment mechanism in proof-of-work that rewards scientific problem solving, integrating incentives directly into blockchain mining.

Findings

Reduces energy consumption in blockchain mining.

Successfully incentivizes scientific optimization problem solving.

Maintains decentralization without additional protocol layers.

Abstract

We propose DIPS Difficulty-based Incentives for Problem Solving), a simple modification of the Bitcoin proof-of-work algorithm that rewards blockchain miners for solving optimization problems of scientific interest. The result is a blockchain which redirects some of the computational resources invested in hash-based mining towards scientific computation, effectively reducing the amount of energy `wasted' on mining. DIPS builds the solving incentive directly in the proof-of-work by providing a reduction in block hashing difficulty when optimization improvements are found. A key advantage of this scheme is that decentralization is preserved and no additional protocol layers are required on top of the standard blockchain. We study two incentivization schemes and provide simulation results showing that DIPS is able to reduce the amount of hash-power used in the network while generating solutions to optimization problems.