Summary
We maintain that Proof of Work is the only credible way to run a permissionless blockchain, but the consensus around Proof of Work is that miners are primarily motivated by greed. In this article, we make a case for how the calculus changes on a chain that supports actual commercial activity: When commercial actors and institutions actually have something at stake, mining defensively, not just for direct profit, becomes a rational choice.
At its core, this is yet another consequence of the decision to embrace the need to be regulation-friendly to attract commercial activity on a large scale.
Greed as a driving force
Permissionless networks depend heavily on incentive structures. The mining contest offers a perfectly fair competition: A randomly designed puzzle, and whoever solves the puzzle wins a reward and the right to add content to the chain; further rewards accrue from the fees for the content added. The assumption is that miners who enter the contest for the rewards are likely to optimize for maximum reward rather than worry about the content itself.
Also, since the probability of finding a solution is the same for each mining attempt, the randomness of the contest makes it likely that a miner who wants to censor will not be able to do so reliably – if the majority of mining power comes from greedy miners, content selection will remain neutral.
But there are some concerns.
- Any miner who can field a significant majority of the total mining power will be able to stage a number of different attacks. There are possible mitigations for long-range attacks, and for robust censorship, it’s likely that a qualified majority of the mining power is necessary.
- Actors driven primarily by greed might find it more profitable to comply with a hidden agenda, or even to mount brute-force attacks against a chain, if it is found more profitable to do so than to serve the interest of the chain.
- Even with intermittent censorship, it’s possible to inflict damage on services that rely on timely inclusion of content.
- Just like we argue that anonymous Proof of Stake is highly problematic, so would a relatively small pool of anonymous Proof of Work miners be. By tracing the beneficiary accounts of mined Bitcoin blocks, it was found that a single custodian seems to control 47% of the total Bitcoin mining power.
- If miners are driven solely by the profit margin, they cannot be expected to stay loyal to any given chain. If prices and fees dip on the chain, miners may leave. This lowers total hash power, making the chain vulnerable to attacks, and this creates incentives for market making and bribing miners to stick around.
Even given the above problems, Proof of Work remains the most robust approach to protecting a decentralized blockchain.
Mining pools
Mining pools offer a way to engage in mining with lower capital costs and with fractional returns. Instead of running a complete mining rig, including a full blockchain node, and getting rewards only when actually getting to produce a block, users in a mining pool can either run just the mining card, or rent a share in a mining setup. The mining pool distributes puzzles for the participants to try to solve, and if a solution is found, the pool operator posts the actual block, sharing the rewards proportionally with the pool members.
Just like ordinary miners, mining pools can mainly be trusted to act in their own interest. They are often located in areas with lax regulations, or where regulators or other stakeholders might be suspected of influencing the operation of the pool.
The Gajumaru approach
Gajumaru was designed to solve the main problems keeping traditional vendors from adopting blockchain technology. This is described in more detail in other articles, but in short, the Gajumaru is an ecosystem whose core, Groot, is a properly decentralized Proof-of-Work blockchain, which acts as a minting authority and safely connects Associate Chains, which can be properly regulated, private or otherwise. This produces conditions for using the Gajumaru currency, the GAJU, as actual money, as well as supporting other regulated digital currencies in the system. In short, compatibility with existing regulations, while using the decentralized core as a neutral, cost-efficient interconnect between different regulated realms.
The defensive miner
Being a Proof-of-Work chain, Groot will need to attract a healthy mining community. In the short term, mining offers a significant early-mover advantage. But in an environment where commercial actors decide to stake their own business on the correct functioning of the ecosystem, defensive mining actually becomes a rational choice. Contributing to the total mining power is in itself a good thing. The mining activity does not have to be profitable per se, as the main profit interest is the commercial traffic on-chain which relates to the business.
Regulated mining pools
Groot is the unregulated domain of the Gajumaru. It would seem to follow from this that block producers should be unregulated as well, but this is not necessarily the case.
A mining pool operating in a well-regulated space should clearly advertise its content selection policy, i.e. committing to being content-neutral in its block production. This would make it a breach of contract with the pool members to engage in any form of censorship, and there will be a proper jurisdiction in which to litigate this.
Commercial actors who seek to do defensive mining as a form of insurance, could then join a mining pool within its own jurisdiction, and trust that the pool leverages the contribution in the best interest of the Gajumaru ecosystem.
In the ideal case, such a mining pool will turn a decent profit, also becoming a means to accumulate GAJUs through the mining activity itself, but even if not profitable for the pool members, the setup can remain viable as it protects the core interest of commercial users of the chain.
GajuMining
GajuMining is the mining effort for the Gajumaru blockchain, rewarding Gajus in return for compute power. For those who want to join Gajumaru’s mining community, you have a head start from now until the end of whitelist mining in 2027. During this period, you can acquire Gajus with minimal difficulty and modest hardware requirements.