The Rich Get Richer in Bitcoin Mining Induced by Blockchain Forks

TL;DR

This paper investigates how blockchain forks in Bitcoin lead to a concentration of mining rewards among larger miners, demonstrating a 'Rich Get Richer' effect through a validated analytical approach.

Contribution

It provides a theoretical analysis of the TRGR phenomenon in Bitcoin, especially under fixed and variable block propagation delays, improving upon previous low-precision methods.

Findings

TRGR occurs in Bitcoin due to blockchain forks.

Mining profit rate depends linearly on hashrate proportion.

Results are robust under various block propagation delay scenarios.

Abstract

Bitcoin is a representative decentralized currency system. For the security of Bitcoin, fairness in the distribution of mining rewards plays a crucial role in preventing the concentration of computational power in a few miners. Here, fairness refers to the distribution of block rewards in proportion to contributed computational resources. If miners with greater computational resources receive disproportionately higher rewards, i.e., if the Rich Get Richer (TRGR) phenomenon holds in Bitcoin, it indicates a threat to the system's decentralization. This study analyzes TRGR in Bitcoin by focusing on unintentional blockchain forks, an inherent phenomenon in Bitcoin. Previous research has failed to provide generalizable insights due to the low precision of their analytical methods. In contrast, we avoid this problem by adopting a method whose analytical precision has been empirically validated. The primary contribution of this work is a theoretical analysis that clearly demonstrates TRGR in Bitcoin under the assumption of fixed block propagation delays between different miners. More specifically, we show that the mining profit rate depends linearly on the proportion of hashrate. Furthermore, we examine the robustness of this result from multiple perspectives in scenarios where block propagation delays between different miners are not necessarily fixed.