HaPPY-Mine: Designing a Mining Reward Function.

In cryptocurrencies, the block reward is meant to serve as the incentive mechanism for miners to commit resources to create blocks and in effect secure the system. Existing systems primarily divide the reward in proportion to expended resources and follow one of two static models for total block reward: (i) a fixed reward for each block (e.g., Ethereum), or (ii) one where the block reward halves every set number of blocks (e.g., the Bitcoin model of halving roughly every 4 years) but otherwise remains fixed between halvings. In recent work, a game-theoretic analysis of the static model under asymmetric miner costs showed that an equilibrium always exists and is unique [4]. Their analysis also reveals how asymmetric costs can lead to large-scale centralization in blockchain mining, a phenomenon that has been observed in Bitcoin and Ethereum and highlighted by other studies including [11, 16].