An Empirical Analysis of Pool Hopping Behavior in the Bitcoin Blockchain

Abstract

We provide an empirical analysis of pool hopping behavior among 15 mining pools throughout Bitcoin's history. Mining pools have emerged as major players to ensure that the Bitcoin system stays secure, valid, and stable. Individual miners join mining pools to benefit from a more predictable income.Many questions remain open regarding how mining pools have evolved throughout Bitcoin's history and when and why miners join or leave mining pools. We propose a heuristic algorithm to extract the payout flow from mining pools and detect the pools' migration of miners. Our results showed that payout schemes and pool fees influence miners' decisions to join, change, or exit from a mining pool, thus affecting the dynamics of mining pool market shares. Our analysis provides evidence that mining activity becomes an industry as miners' decisions follow classical economic rationale.

The Evolution of Mining Pools and Miners’ Behaviors in the Bitcoin Blockchain

“…This article is an extension of our previous conference paper [10] in which we proposed a new approach to detect individual miners from the reward payout flow and evaluated miners' migration (pool hopping) among the top 15 mining pools. In this extension, we contribute additional updated content regarding the evolution of 23 mining pools and miners' mobility behaviors up to Aug. 2021.…”

“…. We provided an evaluation to justify that our approach can be used to detect miners' addresses in our previous article [10].…”

A new approach for Bitcoin pool-hopping detection

“…Authors in. [22] also empirically studied the phenomenon of pool-hopping across the ledger to identify and define pool migrations in Bitcoin history. They focused on how miner pools evolved to adapt to the behaviors of miners moving between them, creating a system of competition.…”

“…Our algorithmic framework can be qualitatively compared to two empirical detection papers, already briefly presented in the background section. The first one implements a different algorithmic and evaluation strategy in [22]. The second one does not consider important and more newly born hypotheses [3].…”

“…They emerged to provide a more stable and predictable income for miners by offering the ability to share computing resources. Mining pools play an essential role in the security and performance aspects of the network and, nowadays, dominate Bitcoin mining activity as they contribute to ≈ 99% of the total hash rate [22]. Pools compete with each other to attract more miners in order to get a higher market share and have a better chance of getting a reward for mining.…”