SmartPools: A Decentralized Mining Solution#
SmartPools are a decentralized alternative to traditional mining pools. They replace centralized mining pools with autonomous on-chain smart contracts. The latest development in this area is the Lithos Protocol, which represents the next generation of SmartPools.
The Concept of SmartPools#
The concept of SmartPools was first introduced at the ErgoHacks event. The idea was to replace centralized mining pools with an autonomous on-chain smart contract. A team of developers spent a weekend researching this concept and produced a whitepaper outlining their findings. This work was continued by another developer at ErgoHack II, who implemented the 'Sub Pooling' design specified in the SmartPools whitepaper.
The Impact of SmartPools#
The introduction of SmartPools is a significant development in the world of mining. By replacing centralized mining pools with smart contracts, SmartPools can help reduce the risk of 51% attacks and other issues associated with centralization.
Transparency in Mining Pool Fees#
In traditional mining pools, fees can vary between 1-3%, and miners can never be sure if they are getting their fair share. SmartPools aim to create transparency in this area, ensuring that miners' shares are distributed as earned. While the fees for using SmartPools may initially be around 1%, it is expected that these will be reduced to approximately 0.1% in the future to cover upkeep costs.
The Risks of Centralization#
Centralization carries the risk of abuse, network halting, or double-spend attacks. As technology improves, the need to rely on centralized entities diminishes, making solutions like SmartPools increasingly important.
The Problems SmartPools Aim to Solve#
SmartPools aim to address several issues associated with traditional mining pools:
- Centralized mining pools charge high fees and it is not possible to verify the payments.
- Centralized mining pools pose a threat to network security as they control more shares in hash rate distribution.
- Solo miners require mining pools; otherwise, block finding times will be too long.
The SmartPools Mining Model#
The SmartPools mining model offers several advantages:
- Mining pool contracts and reward schemes are verifiable and fair.
- Fees needed to maintain the server and fund the developers can be deducted on-chain.
- Decentralized mining models can prevent the manipulation of hash-power.
Ergo believes that SmartPools represent a necessary and essential step towards future decentralization. As we build the blockchain of the future, we hope to see as many facets of decentralization as possible.