Retained Proof of Work: Evolution or Revolution?

Introduction

Proof of Work (PoW) has long been the backbone of blockchain security, ensuring decentralization and immutability. However, traditional PoW models face a looming challenge: as block rewards diminish over time, mining will eventually rely solely on transaction fees. This transition raises concerns about sustainability, as transaction fees alone may not always be sufficient to maintain network security and incentivize miners.

For example, Bitcoin block 884,126, mined on February 17 - 2025, had a fixed block reward of 3.125 BTC, valued at $300,984.38. The total transaction fees in this block amounted to 0.01465078 BTC, worth approximately $1,411.09. According to data from macromicro.me, the average cost to mine a Bitcoin block is currently $278,125. Without the fixed block reward, miners are earning only $1.4k per block would be operating at a significant loss, making mining unsustainable.

Looking ahead — more than 100 years into the future, when the last BTC is mined — this dynamic may shift if Bitcoin’s network usage increases substantially. However, this remains uncertain. Some blocks might accumulate high transaction fees, while others may have very few transactions, leading to inconsistent miner incentives. This presents a clear challenge in the current landscape.

To tackle this challenge, Retained Proof of Work (RdPoW) represents an innovative evolution of Proof of Work (PoW). It provides a solution that stabilizes mining costs and ensures long-term participation from miners. By redistributing rewards based on mining difficulty, RdPoW has the potential to reshape the future of mining.

The Problem with Traditional PoW Incentives

In most PoW blockchains, miners are rewarded through two primary sources:

1. Block Rewards — Newly minted coins distributed to miners for securing the network.
2. Transaction Fees — Fees paid by users for processing transactions.

Over time, block rewards decrease due to halving mechanisms (e.g., Bitcoin) or reaching max supply limits (e.g., Kaspa in 2037). Once block rewards are gone, miners must rely entirely on transaction fees. This poses several risks:

• Volatility — Transaction fees fluctuate and may not provide consistent income.
• Security Risks — Lower incentives could lead to reduced mining power, making networks more vulnerable to attacks.
• Mining Centralization — Only large-scale miners with access to ultra-cheap electricity may remain profitable, reducing decentralization.

How Retained Proof of Work Solves These Issues

Retained Proof of Work (RdPoW) offers a paradigm shift by rewarding miners based on accumulated mining difficulty. Here’s how it works:

1. Miners Solve Computational Work — Miners perform computing work as usual
2. Mining Rewards Are Distributed Based on Difficulty — Miners receive rewards proportional to the computational effort expended over time. The higher the mining difficulty, the higher the reward and vice versa
3. Sustained Incentives — Since rewards are tied to difficulty, miners with varying electricity costs and efficiency levels can continue participating, ensuring network security. The value of the reward corresponds to the amount of work done, ensuring that the coin’s intrinsic value is directly derived from computational effort, reinforcing its economic foundation.

This approach creates a more dynamic and stable mining economy, where rewards do not disappear abruptly but are instead distributed in a way that ensures continuous miner participation but without losing or reducing intrinsic value.

Advantages of Retained Proof of Work

1. Stabilized Mining Costs

One major challenge for PoW blockchains is the unpredictability of mining costs. As block rewards decline and miners depend on transaction fees, mining can become unprofitable, risking network stability. Retained Proof of Work addresses this by keeping rewards proportional to difficulty, stabilizing mining costs over time.

With difficulty-based rewards:

• Predictable Mining Economics — Miners can anticipate and adjust their operations based on stable reward structures rather than fluctuating fees.
• Continuous Participation — Different miners have different cost structures, but with stabilized mining rewards, there will always be a group of miners who find it profitable to continue mining, even when transaction fees are insufficient.
• Network Security — By maintaining mining block incentives together with transaction fees, the network remains secure, as miners continue validating blocks without drastic profitability swings.

Retained Proof of Work introduces a sustainable model where mining incentives remain viable regardless of transaction fee volatility. This ensures a resilient and secure PoW ecosystem for the long term.

2. Long-Term Sustainability

Mining rewards are linked to the level of difficulty, which helps stabilize mining costs. This allows networks to continue rewarding miners over the long term without leading to extreme inflation. The mining costs are set at a fixed and appropriate level when all coins have been mined under the previous model. This structure ensures that Proof of Work (PoW) networks remain sustainable even after traditional block rewards come to an end.

3. Increased Network Security

With traditional PoW, a decline in mining incentives could lead to a drop in hash rate, making networks vulnerable to 51% attacks. RdPoW mitigates this risk by ensuring there is always an incentive to mine, maintaining strong network security even in periods of low transaction volume.

4. Decentralization and Inclusion

RdPoW enables miners with varying costs to participate, ensuring that even those with higher energy expenses do not drive out lower-cost miners. This diversity helps prevent mining centralization and maintains the decentralization of PoW blockchains.

Canxium’s Implementation of Retained PoW

Canxium is pioneering Retained Proof of Work by integrating it into its blockchain architecture. The network enables miners to accumulate computational work and redeem rewards later. Additionally, Canxium supports cross-mining, allowing miners to retain and transfer PoW from other blockchains like Kaspa, creating a multi-network security model where different PoW chains benefit from each other’s security contributions.

Conclusion

As PoW networks approach the end of their block reward lifecycles, Retained Proof of Work presents a sustainable alternative to traditional mining incentives. By stabilizing mining costs, securing long-term miner participation, and preventing centralization, RdPoW has the potential to redefine how PoW blockchains function in the future.

Canxium is at the forefront of this innovation, demonstrating how PoW can evolve to remain secure, decentralized, and economically sustainable. The transition from conventional mining to RdPoW could mark a turning point in blockchain security and miner incentives.

The future of PoW is Retained Proof of Work — ensuring sustainability, security, and inclusivity for generations to come.

Unlike Bitcoin, Kaspa will distribute its entire supply of KAS as mining rewards until 2037, allowing us to witness firsthand the challenges predicted in this article. Without Kaspa as a case study, we might only fully grasp these issues when the last BTC is mined — by then, it could be too late to address them effectively.

Get Involved

• Join Canxium’s GitHub to explore mining software.
• Follow Canxium on X for updates.
• Connect with the community on Telegram and be part of the mining revolution.

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