Cryptocurrency mining can be said to be the modern
alchemy, involving as it does the transmutation of electricity
into digital gold. The goal of mining is to guess the solution
to a cryptographic puzzle, the difficulty of which is determined
by the network, and thence to win the block reward and
transaction fees. Because the return on solo mining has a very
high variance, miners band together to create so-called mining
pools. These aggregate the power of several individual miners,
and, by distributing the accumulated rewards according to some
scheme, ensure a more predictable return for participants.
In this paper we formulate a model of the dynamics of a queue-
based reward distribution scheme in a popular Ethereum mining
pool and develop a corresponding simulation. We show that the
underlying mechanism disadvantages miners with above-average
hash rates. We then consider two-miner scenarios and show how
large miners may perform attacks to increase their profits at the
expense of other participants of the mining pool. The outcomes of
our analysis show the queue-based reward scheme is vulnerable
to manipulation in its current implementation.