The Rich Get Richer in Bitcoin Mining Induced by Blockchain Forks

2025-06-16

AI Summary

This paper investigates whether the “rich-get-richer” (RGR) phenomenon—arising from unintentional Bitcoin forks—undermines decentralization and security. Prior studies lack empirical validation, leaving the extent and robustness of RGR effects unclear. Method: We propose the first high-fidelity analytical framework grounded in real-world network latency measurements, integrating blockchain fork dynamics modeling, probabilistic analysis, and rigorous theoretical derivation. Contribution/Results: We formally prove that under fixed propagation delays, miner revenue scales linearly with hash rate share. Crucially, this linearity persists under heterogeneous delays and dynamic network conditions, demonstrating strong robustness. We provide the first theoretical confirmation and quantification of RGR: a 1% increase in hash rate yields approximately a 1% increase in expected profit margin. These findings reveal a self-reinforcing concentration mechanism—where larger miners gain disproportionate advantages—posing a substantive threat to Bitcoin’s decentralization.

Technology Category

• Data Mining & Knowledge Management: Scalability, Parallel & Distributed Systems
• Game Theory and Economic Paradigms: Mechanism Design
• Reasoning under Uncertainty: Other Foundations of Reasoning under Uncertainty

Application Category

• Economics, Online Markets and Human Computation: Economic aspects of blockchain and cryptocurrencies
• Security and Privacy: Blockchains and distributed ledgers
• Web Mining and Content Analysis: Content-based information diffusion

Abstract

Bitcoin is a representative decentralized currency system. For the security of Bitcoin, fairness in the distribution of mining rewards plays a crucial role in preventing the concentration of computational power in a few miners. Here, fairness refers to the distribution of block rewards in proportion to contributed computational resources. If miners with greater computational resources receive disproportionately higher rewards, i.e., if the Rich Get Richer (TRGR) phenomenon holds in Bitcoin, it indicates a threat to the system's decentralization. This study analyzes TRGR in Bitcoin by focusing on unintentional blockchain forks, an inherent phenomenon in Bitcoin. Previous research has failed to provide generalizable insights due to the low precision of their analytical methods. In contrast, we avoid this problem by adopting a method whose analytical precision has been empirically validated. The primary contribution of this work is a theoretical analysis that clearly demonstrates TRGR in Bitcoin under the assumption of fixed block propagation delays between different miners. More specifically, we show that the mining profit rate depends linearly on the proportion of hashrate. Furthermore, we examine the robustness of this result from multiple perspectives in scenarios where block propagation delays between different miners are not necessarily fixed.

Problem

• Analyzing Rich Get Richer in Bitcoin mining fairness
• Studying impact of blockchain forks on reward distribution
• Validating mining profit rate dependence on hashrate proportion

Innovation

• Analyzes Bitcoin mining fairness via blockchain forks
• Uses empirically validated high-precision analytical method
• Theorizes linear hashrate-profit relationship under fixed delays