Ryan asks after reading this week's
coursework I was interested in checking
out the blockchain Explorer on
blockchain calm
I saw a mining pool named f2 pool quite
often I noticed that on October 3rd 2019
they mined 18 blocks is it fair to
assume then that this pool alone
potentially made a gross profit of 1.8
million dollars in one day not including
transaction fees what are the economics
of these pools how much of that 1.8
million is potentially profit well it
depends it depends on the electricity
cost operational cost and hardware cost
of the miners who are participating now
keep in mind and this is really really
important mining pools are not miners
miners are the people with a hardware
mining pools are the coordinators who
help the miners collaborate so they can
smooth out their earnings so it's not
the mining pool that's mines these
things it's actually the miners who
participate in that pool who bind these
blocks and how much of that 1.8 million
was profit we don't know the profit
ranges between zero in many cases some
of these are not profitable and in some
cases up to 30% or more when the cost of
electricity is low the price of Bitcoin
is high the hash rate of a specific
miner is high and they're able to get
lots and lots of blocks and even more so
when the transaction fees are high so
the profit margin depends on all of
these factors which are highly highly
individualized different miners have
different profit margins and operating
costs which actually is a great way for
the system to dynamically balance Ryan
asks given the race by both users with
fees and miners with hashing is it
possible that some wallets secretly
working with certain pools can send
transactions directly to the mempool of
those mining pools first or a few
seconds before everybody else and give
them a slight edge to build an ideal
block or create higher fees yes this is
in
it's possible not just possible it has
happened there are times in the network
where miners have created their own
transactions with elevated fees injected
them into the mempool of various mining
pools that they're well connected to
where they get propagated very very fast
causing the mem pool to have lots of
high feat transactions and then that
causes all of the other users who want
to put in transactions to elevate their
fees now this is a strategy that is very
risky if a miner that is constructing
these in in collaboration with some
wallet that they've built to do this to
jam high feet Ran's actions into the men
pool in order to elevate the prices if
that miner isn't actually mining those
transactions effectively they're
spending these fees and paying the other
miner that ended up mining these
transactions so the strategy only works
for miners who have a very high
percentage of the hash rate so they can
recoup some of the fees they're spending
trying to jam the market of course if
all miners are doing this and they do
this kind of collusion then what happens
is that fees can be elevated however
keep in mind from a game theory
perspective if you're one of the miners
and you notice all of your colleagues
are jamming transaction with high fees
into the men pool to drive up fees what
you can do is sit back not pay a thing
and let them drive up fees while you
just earn them by mining and you're not
risking these transactions that might be
mined by someone else which means that
you make as much money as they make per
your hashing power from the higher fees
but you're not spending money to create
these higher fees well if you think
about it if everybody do does that then
nobody is willing to take the risk of
creating the high fee transactions
because those would benefit all of the
other miners and they'd be taking on all
of the cost it's a classic trad
the common scenario and in this
particular case it works of benefit of
users because this only works if there's
a lot of collusion between a lot of
miners who have a lot of hash power
during a time when fees are already high
and there's some kind of political
fights going on which is why this
happened mostly in the summer preceding
the hard fork of Bitcoin cash and the
huge debate over scaling where people
wanted to make a point about how full
the system was now it may happen from
time to time again but it's a risky
strategy for miners that they can only
pull off when there's a lot of collusion
and where miners can easily reap all the
benefits and pay none of the costs by
taking advantage of that so it's a
losing strategy most of the time
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