The recent concentration of the mining industry is reviving old demons. The Foundry USA pool has taken control of a third of the hashrate and threatens the decentralization of Bitcoin.
The hen with BTC
A pool is like a lottery syndicate. BTC miners pool their computing power there to smooth income over time.
Some miners mine solo since the expected gain is mathematically the same over the long term. But you have to be able to take long months without finding a single block while the electricity bills pile up.
[Si le mining de bitcoin et le fonctionnement des pools vous intéressent, rendez-vous sur cet article : Bitcoin Mining – Comment ça marche vraiment ?]
Unfortunately, it regularly happens that the computing power (hashrate) is found to be too concentrated in certain pools. This is what we have observed for some time.
The American pool Foundry USA has found 33 % of blocks in the last five weeks. This means that it receives 33% of the hashrate. From this point of view, Bitcoin is absolutely not decentralized:
One of the risks often highlighted is the famous 51% attack. Certainly, but the fact is that a pool does not control its hashrate. No more than a CEO does not control his company if he is not the majority shareholder.
Clearly, even if the pool can indeed carry out a 51% attack (double spend problem), miners can also pack up. A power that can be revoked at the slightest sign of malfeasance is not really a power.
That said, increased centralization can, in the long run, make small pools with income (proportional to the hashrate) too narrow disappear. The absence of alternatives would be of concern.
Censorship risk
More than the 51% attack, it is actually more the uncensorable nature of Bitcoin that is at stake in the face of pool concentration.
Indeed, it is the pools that choose the transactions placed in the blocks. So much so that it would be enough to oblige the large pools by law so that certain addresses are placed on the blacklist. Such addresses will then have to wait for a solo miner to get lucky quickly.
Of course, this is the worst case scenario. Other unregulated pools would eventually emerge. In addition, improvements exist. Here’s what decentralization would look like if all pools were using the brand new Stratum V2 protocol:
We explained it last October during the launch of Stratum V2:
“Unfortunately, the architecture of Stratum V1 is such that it is the pools that select the transactions included in each block. Suffice to say that we are light years away from the Ethos of Bitcoin since the hashrate is infiltrated by a handful of pools.
After 10 years of waiting, Stratum V2 offers the possibility for miners to create blocks containing transactions chosen by them. This option would allow minors to revolt against the censorship of certain transactions. This simple threat will deter renegade pools and possible murderous regulations. »
This new open-source protocol is being pushed by payments giant Block (Jack Dorsey), exchange BitMEX, Galaxy Digital fund, Braiins, Spiral and, interestingly, pool Foundry USA.
Some factors of decentralization
ASIC manufacturers are also part of the decentralization equation. The more ASIC manufacturers there are, the lower their prices will be, which contributes to decentralization. The company making the most efficient ASICs is Bitmain.
But others are on his heels. Notably Canaan, MicroBT, Halong Mining Company or the Japanese Triple-1 and its “Kamikaze II” ASICs.
Note also that the addition of the Stratum V2 software cancels the guarantee (six months) of the ASICs. Their makers should be more flexible in the name of Bitcoin ethos.
The recent launch of a second-hand market for ASICs worthy of the name by Luxor Mining will certainly contribute to the building:
The concentration of ASICs in gigantic “Mining Farms” similarly undermines decentralization. The miner Core Scientific, for example, managed to collect 10% of the hashrate.
The “good” news is that this miner recently went bankrupt, suggesting that it’s best not to put all of your ASICs in one basket.
Surviving bear markets requires paying less for electricity than the competition. Which means scattering small installations of a handful of megawatts around the world.
However, such a division of activities often leads to a sharing of machine ownership with local actors. And therefore more decentralization.
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