A Bitcoin core developer, Matt Corallo, has proposed a new protocol named BetterHash that would make Bitcoin mining more decentralized. He published a draft of the Bitcoin Improvement Proposal on GitHub.
The most widely deployed mining protocol, Stratum, requires pool operators to distribute block templates to pool users. This increases centralization of the Bitcoin mining process since pool operators can choose to selectively ignore protocol changes. The primary goal of BetterHash is to fix Stratum’s deficiencies.
It would be more decentralized if each individual miner could choose their block template, and this would end up covering a broader spectrum of protocols allowing more diversity of transactions into blocks, reducing censorship on the Bitcoin network. As things are, now the only way for miners to select their own block templates is to solo mine, which takes an extreme amount of mining equipment to have any success.
BetterHash separates work information and pool payout information into different channels. The work information channel replaces Stratum as the communication channel between the Bitcoin network and the miner, and the pool payout information channel handles communication between the pool and the miner. This allows miners to choose their own block templates while the pool distributes payments.
Another problem that BetterHash addresses is the lack of a cryptographically secure connection between the miner and the pool’s server, which could allow hackers to silently gain control of mining power until the pool operator or miners intervene, resulting in loss of Bitcoin earnings.
Overall, switching to BetterHash would increase performance, increase security of mining, ease transitions to new Bitcoin consensus rules, allow more robust block templates, and increase mining decentralization. The BetterHash protocol also takes a lot of load off pool servers since work would be managed by miners.
Changes in Bitcoin’s protocol are always controversial and require a long period of debate and testing before any adoption occurs, no matter how beneficial the protocol change is. A good example is SegWit, believed to be beneficial since it gets rid of transaction malleability and helps the block size problem, but disagreement over its suitability caused a rift in the community that continues to this day.
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