Characterizing relationships between primary miners in Ethereum by analyzing on-chain transactions

TL;DR

This paper analyzes on-chain transactions in Ethereum to reveal complex relationships and highly connected clusters among miners, challenging existing assumptions about mining centralization and informing network vulnerability assessments.

Contribution

It uncovers previously overlooked miner relationships and network structures through on-chain transaction analysis, providing a more nuanced view of Ethereum mining centralization.

Findings

Existence of relationships between miners beyond pool payouts

Highly connected clusters control significant hashing power

Clusters exhibit relationships opposite to theoretical predictions

Abstract

It is widely accepted that Ethereum mining is highly centralized. Nonetheless, centralization has been mostly characterized by exclusively looking at the influence that independent miners or mining pools can have over the network. Moreover, models of mining behavior assume that miners are either unrelated or only relate via mining pools under highly structured and transparent agreements. If these assumptions and the predictions they entail were to be completely accurate, there would not be any evidence of on-chain transactions between miners, other than the ones expected from mining pool payouts. By looking at on-chain transactions between miners in the Ethereum Network we find that aside from the payouts from mining pools to small miners, there are also transactions that define relationships between mining pools, independent miners and between independent miners and mining pools. Furthermore, by characterizing the topology of the network of miner transactions, we find the emergence of highly connected clusters that control significant amounts of hashing power and exhibit relationships in the opposite direction of what theoretical models predict. This more nuanced characterization of mining centralization can help identify network vulnerabilities and inform protocol redesigns.