DPoW: A decentralized proof-of-work consensus mechanism for blockchain system

Abstract

Proof of Work (PoW) serves as a consensus mechanism in blockchain that verifies and selects the next node through solving computationally intensive puzzles. As competition in computation has intensified and mining difficulty has increased, individual miners have tended to join forces by forming mining pools. This allows them to generate blocks more quickly and receive a consistent portion of the block reward, rather than randomly. However, this collaboration could potentially introduce a centralization risk, as a few pools gain significant control over the network’s hash power. To alleviate the centralization in PoW mining, this research proposes an incentive mechanism named Decentralized Proof of Work (DPoW), where a dynamic reward allocation algorithm is designed and the mining rewards are dynamically allocated between the first and second block proposer. Then a dynamic evolutionary game model based on node behavior is constructed to simulate the pool evolution process. This model considers different pool selection preference towards original PoW and the proposed DPoW. Solo miners can dynamically adjust their strategies based on the expected payoff and revenue stability. Furthermore, the equilibrium stability of the model in DPoW is compared with that in original PoW. Through theoretically probing miner preferences in pool selection and assessing decentralization metrics, this research demonstrates DPoW enables the blockchain network to enjoy decentralization superiority compared to traditional PoW.