My third proposed modification is a method for significantly reducing the variance of payouts from one address to another, while also reducing the amount of data load on the blockchain.
First, when we think about variance, we should consider that for any given set of eligible mining addresses, there is a fixed period it will take for the expected variance to fall below a desirable threshold. This expected variance is the same whether the rounds have an independent probability (like coin flips) or whether one employs a round robin approach to cycle through all addresses before restarting a round cycle.
Second, when we think about minimizing load on the Bitcoin blockchain, we should not be focusing on the total number of transactions, but rather the total number of bytes. Bitcoin addresses are priced in bytes and the scarce resource is bytes. Transactions scale with the number of inputs and outputs. A transaction with 1 input and 7 outputs (5 recipients, 1 change address, 1 data field) can lead to approximately 2x the data load as a transaction with 1 input and 3 outputs (1 recipient, 1 change address, 1 data field).
Now for the proposed modification.
In SIP-007, the proposal features a mechanism where in every round, a new set of 5 addresses is randomly selected to be the recipients of the proof-of-transfer process.
I propose changing this so that in each round, instead of requiring all miners to send to the same 5 recipients, the protocol randomly selects a distinct address for each miner, which serves as the recipient for the miner’s proof-of-transfer transaction.
For example, imagine that in a hypothetical system there are 5000 miners and 5000 addresses with equal balances. Then in each round, each address should probabilistically be the recipient of 1 mining transaction on average (#2438 would send to #1872, while if #1872 is mining it would send to #4831, and so on).
In a hypothetical system with 5000 addresses with unequal balances, the probability of being selected in any given round-miner-pair would be proportional to the balance of the hodling address.
Address selection would be accomplished by taking the same verifiable random function (VRF), producing a new seed in every round using the VRF, and combining the seed with the address of every pre-committed miner to produce the full list of miner-specific addresses for that round.
This would result in a web of sending in every given round, rather than all miners sending to the same recipients every round.
Variance of earning Bitcoin via the mining process would be significantly reduced, since in every single round a hodler would have N chances to be chosen as the recipient, where N is the number of miners.
Data used per round would also be reduced, since instead of 5000 miners sending 5000 7-output transactions each round, 5000 miners would be sending 5000 3-output transactions each round.
Hope this is helpful and curious to know what you think. Happy to elaborate further or answer any questions you have.