Miners made millions of dollars without ever processing a single transaction?

Bitcoin and other cryptocurrency miners have earned tens of millions of dollars in profits without processing a single transaction, according to a recent research report released by cryptocurrency research organization Diar.

As shown in the above chart, the total income of miners of major cryptocurrencies has exceeded $21 billion, among which the miners of mainstream proof-of-work (PoW) blockchains (such as Bitcoin, Ethereum, Litecoin and Dash) have the highest income, totaling more than $18 billion. In addition, Bitcoin Cash miners have also earned nearly $1 billion since the fork. There are also Zcash miners, who earn more money than Bitcoin Cash miners, but Zcash is one of the least used blockchain networks.

Bitcoin and Ethereum process the most transactions

Bitcoin Cash miners have processed more than 3,300 empty blocks since August 2017, while some major blockchain networks (including Zcash and Decred) are making as much as $5 million in miner profits per month.

Bitcoin and Ethereum are the most popular proof-of-work blockchains and the blockchains with the fewest empty blocks. Diar mentioned in its analysis report that although the number of empty Bitcoin blocks has been decreasing since 2015, Bitcoin miners still made $42 million in profit from empty blocks in 2018 (as shown in the figure below).

The number of empty blocks in Ethereum has reached the lowest level in history, and has decreased by 98% compared to the number of empty blocks in 2016. However, in 2017, Ethereum still paid more than $65 million for empty blocks (as shown in the figure below).

However, Diar's analysis also reveals the fact that miners are basically doing nothing, and they are still making money even with so many empty blocks. But it should be noted that regardless of whether there are transactions on the blockchain, miners have invested a lot of money to protect the network, and the reduction in the number of transactions actually has a certain impact on their income. After all, the more transactions they verify, the more block rewards they will get.

Litecoin has the most empty blocks

Litecoin has the most empty blocks because the network is not fully utilized and the block generation time has become faster. At present, the Litecoin block generation time is about two minutes, which means that miners will locate a new block every two minutes. However, due to the large difference between the actual time and the mining difficulty, Litecoin miners often choose some "lean" blocks to mine.

For example, as of Tuesday (February 26), Litecoin block 1586699 had only four transactions with a total transaction value of less than 1 LTC. However, the mining reward for this block was more than 25 LTC, which means that miners processed less than $50 in transactions but received more than $1,000 in mining rewards.

Even if we consider the miner reward as the “network transaction fee”, that is, the cost of the entire network, this situation is actually very outrageous. However, what is even more outrageous is that the ten blocks after block 1586699, that is, block 1586709, is a completely empty block, which means that the miner processed $0 transactions but received a block reward worth $1,000.

The problem doesn't end there.

You know, the blockchain must run 24 hours a day to be useful, but if the blocks are empty, should miners get the same reward as full blocks? Since cryptocurrencies on blockchains are usually not in unlimited supply, such as Bitcoin, which has a limit of 21 million, this empty block reward actually raises the question of how the number of tokens that can be used to incentivize real transaction verification will become smaller and smaller, and no one knows what will happen when the reward runs out.

Long-term outlook: Problems remain

In order to solve the problem that empty blocks can still get rewards without verifying transactions, Monero adopts a "long tail" emission strategy to solve it, that is, at a certain point in the future, each block will receive the same block reward. However, if this strategy is implemented for a long time, will it cause inflation? Of course it will. But at least from the current point of view, Monero's incentives are still relatively stable.

Bitcoin, Bitcoin Cash, and Litecoin will continue the incentive of "halving" forever. From an economic point of view, the fewer new tokens are produced, the more limited the money supply will be. After all, miners are usually the main sellers of new tokens. However, there is another question facing miners - can the market price of cryptocurrency reach an agreement with the psychological price of miners? It is really hard to say, because looking at the price history of Bitcoin, it can be found that several price crashes have made miners unprofitable because the cost of mining is affected by many factors such as region, equipment and electricity.

While supporting blockchain infrastructure, cryptocurrency miners can earn tens of millions of dollars without processing a single transaction. Environmental impact aside, if cryptocurrency mining is to become sustainable, at least this problem needs to be solved first.