Localhost Research is putting more resources into the Bitcoin mining world!

Localhost Research is launching a Mining Unit: a set of contributors working full time on reducing centralization pressures in the Bitcoin mining ecosystem. Alongside our continued efforts to support the FIBRE network, we are making a commitment to a keystone project: P2Poolv2.

Unless you've been living under a rock for the last few years, you've probably heard that Bitcoin mining has a centralization tendancy...and that this is exacerbated by mining pool payout structures like FPPS:

In the last 10 years, FPPS — the payout structure that gives miners regular income regardless of pool luck — has emerged as a stabilizing but centralizing force in this evolving market dynamic. It is attractive for the same reason it is centralizing: it offloads payout-variance risk to a financier willing to backstop pool payouts. To do this effectively, significant capital is required. And it doesn’t always end well. We’ve seen pools collapse when their luck drops below the point at which they are able to backstop payments.

The result is a positive feedback loop: the larger the pool becomes, the less risky its financing becomes, and the more hashrate consolidates around it.

Localhost is putting some efforts into P2Poolv2:

We’ll work on bringing Compact Blocks-style relay to the P2Poolv2 node, simulating and improving the design of the sharechain, integrating P2Poolv2 into modern Mining Management Software (MMS) solutions, and more.

But the most interesting development might be this work on making miner shares transferable. This is something I have heard a little about lately in the context of hashrate marketplaces (I think it's a similar concept -- definitely check out the preceding link if you aren interested in a better understanding of the idea).

In P2Poolv2, shares are not merely accounting entries inside a pool operator’s database. They are marketable claims. A miner who wants immediate, predictable revenue can sell shares for a fixed return in an open market. A market maker willing to warehouse variance can buy those shares in exchange for expected upside. FPPS-like products, PPS-like (Pay Per Share) products, and entirely new payout structures can emerge as competitive financial services on top of the share market, rather than as administrative policies enforced by a pool operator.

I really enjoy the Localhost Research updates as they always seem to be investigating interesting angles on Bitcoin (and they have the best links!).