We have been on a major kick to eliminate mining from way the network provides security and to maximize profitability; however, we still rely upon mining for one function: decentralized selection of who gets to produce the next block. This means that while BTS is not created by mining, miners can still EARN BTS through mining.
To produce a block you must include the minimal number of 'votes' (CoinDaysDestroyed) as proof of stake. However, network security depends upon how quickly votes can be accumulated on top of every block. It is in the networks best interest if a large percentage of BTS shares can sign off on every block in an efficient manner.
We want to pay people for voting with their BTS shares by leaving their wallet 'open' and actively producing blocks. Further more we want to encourage rapid prioritization of blocks that include as many possible voting transactions using as few bytes as possible.
Every block generates fees, and these fees must be split between miners and shareholders as dividends. The network can significantly enhance its security by paying miners who include the most possible votes in the most timely manner. I am contemplating how to set the mining reward as a percentage of transaction fees and have the following proposal:
MIN_VOTES = min CDD required to produce a BLOCK
ACTUAL_VOTES = total CDD by the block
BLOCK_INCOME = total fees paid by all transactions included in the block.
DIVIDEND_RATE = 50% ??
MAX_REWARD = DIVIDEND_RATE * BLOCK_INCOME
REWARD = MAX_REWARD * (1 - (MIN_VOTES / ACTUAL_VOTES))
The result is that as the number of ACTUAL_VOTES approaches infinity, the percentage of MAX_REWARD actually payable to the miner goes to 100%
So how does one maximize their mining efforts? By including as much of their own VOTES per block as possible and insuring the REWARD for their block is > than the cost of including their own transaction to up the CDD.
What does this mean for mining pools? It means that they can be very profitable so long as someone is willing to trust the pool with their shares. A mining pool would be able to cast a large number of ACTUAL VOTES for the least number of bytes (individual transactions).
Because mining difficulty and reward are independent of who makes the transaction, everyone has incentive to include as many transactions as possible and no one has incentive to not relay transactions. Keeping transactions secret and failing to relay will not hurt your competitions mining ability, though it may hurt their profits while increasing the dividends paid to all shareholders. So selfish nodes benefit the network at the expense of other miners. No node has any incentive to exclude transactions because the transaction their income depends upon including as many as possible.
Mining is profitable for all, but you can increase your profits by owning more and using it to produce blocks.