Difficulty Scaling in Proof of Work for Decentralized Problem Solving

Abstract

We propose DIPS (Difficulty-based Incentives for Problem Solving), a simple modification of the Bitcoin proof-of-work algorithm that rewards blockchain miners for solving optimization problems of scientific interest. The result is a blockchain which redirects some of the computational resources invested in hash-based mining towards scientific computation, effectively reducing the amount of energy ‘wasted’ on mining. DIPS builds the solving incentive directly in the proof-of-work by providing a reduction in block hashing difficulty when optimization improvements are found. A key advantage of this scheme is that decentralization is not greatly compromised while maintaining a simple blockchain design. We study two incentivization schemes and provide simulation results showing that DIPS is able to reduce the amount of hash-power used in the network while generating solutions to optimization problems.