Splitting for Stability: a Modified Reward Scheme for Transaction-Fee-Only Regimes

arXiv:2611.13252v1 Announce Type: new Abstract: As Bitcoin's block subsidy declines over time, miner revenue will come to depend increasingly on transaction fees. In fee-dominated regimes, winner-take-all reward structures can create incentives for undercutting and fork-based mining strategies, leading to instability and reduced transaction throughput. To prevent this instability, we propose a reward-splitting mechanism in which the winning block producer receives an $\alpha$-portion of the block reward, while the rest is distributed among other miners; this incentivizes mining on previous blocks with higher rewards, while preserving the incentive to produce blocks with high rewards. We evaluate the proposed reward structure through analysis and simulation. Our analysis derives a local pro