Because the trends do not look good.
The ugly truth what most dismiss, but fear deep inside.
In this article I would like to invite you to an honest conversation about mining centralization.
But before I would like to ask you, while you are reading this article, let’s try to not bury your head into the sand and examine the issue objectively.
First step admitting it
Let’s admit we became powerless over miners and realize this poses a significant, if not the most significant systemic risk we are about to face in one way… or another.
Andreas M. Antonopoulos, the trend setter
I love Andres, but I think the general dismissal of the issue is coming from his rhetoric. He is a true trend setter. I think the “I don’t want to know who Satoshi” attitude was first popularized by him. In fact I am suspecting he is the man behind the whole blockchain hype. Do you remember 2013–2014 when the word “blockchain” was cool? He kept repeating “If Bitcoin won’t succeed, cryptocurrencies will, but the underlying technology, the blockchain surely will”. Of course, today’s blockchain enthusiasts conveniently chose the most comfortable part of his message and so do blockchain hype had born.
And I suspect he is also behind the widely applied ostrich policy on mining centralization. However he cannot be always right and I would argue he is blatantly wrong on this topic.
He has a couple of arguments why mining centralization is a non-issue, let’s review them, one by one.
1. Pools are not miners, therefore mining is decentralized
Ok, I admit that was a badass answer on why 51% attack is just a theoretical attack. However there is a more logical explanation her provided before. I am unable to dig up the source, so I summarize his deduction for you:
- Pools are not miners. Miners can direct their hash power to whatever pool they want.
- As we saw before, when GHash.IO pool reached a significant percentage of hash power, due to our public outreach, they shortly lost most of it.
- Even if someone reaches 51% it is not in his interest to actually execute the attack.
- Even if this miner tries to execute the attack we would immediately hard fork him out.
- Even if we don’t hard fork it out, the best they can do is to modify the last confirmed block, they would not be able to do any significant damage.
2. 14nm: the end of the road for silicon chips
For those who are for whatever reason unable to watch the video: we are approaching the physical limits on the quality of our mining machines, therefore the main factor, people will race with is electricity.
3. China is a big country
Tldr: China is a big, decentralized country. Therefore the mining centralization in China is a non-issue. Mining is still decentralized, but only within China, which is good enough.
Also the enforcement of Chinese law is flexible, bribes can easily reverse it, so it is arguable: even if Xi Jinping wants to crack down on Bitcoin mining, he wouldn’t be able to.
To be fair, the above points are great, reassuring and valid points, but all of them can be argued with.
Mining centralization is a non-issue, until it’s suddenly is
Pools are not miners
Are they really not? Maybe, maybe not. I don’t know, you don’t know, nobody knows it. If you would own 90% of the Bitcoin ming infrastructure would you not distribute your power amongst pools, just to keep the public in line?
51% attack is not feasible
I agree, but debunking an attack does not equal to debunking all the attacks. There are countless ways miners can abuse their powers.
Some would even argue they are abusing it right now and they are the reason of the current development deadlock.
They might be doing it for political reasons. But what if they are just acting rationally? They use this situation to prevent any scaling of Bitcoin. They want the fees to rise, right? Taking transactions off-chain with second layer protocols or elevating the block size limit would lower the miner fees.
The only factor that will matter is electricity, because we reached the 14nm limit
Maybe. If this theory is right that’s great. But what if it’s wrong? It’s not just a “hops, we were wrong”.
Some argue there are other ways incentivize minig. For example Roger Ver is paying extra for those who are mining in his pool.
You might argue he won’t be able to do it long. But what if a walthier entitiy decides to do so with a hidden agenda?
Some say mining in China has little to do with electricity costs and much more to do with capital outflows.
KnCMiner declares bankrupcity and says “it doesn’t understand how the miners in China can be profitable.”
They don’t. It is just a form of money capital outflow. You invest in mining, tolerate the loss, but at least your money is not in Yuan.
Mining centralization in China is a non-issue
I think Andreas’s optimism on this topic has a lot more to do with his political correctness, than actual logic.
I lived in China. If you ask me: “are the rules in China unenforced?” My answer is yes. You can cross red lines, you can sell your food without license on the street. These are small and decentralized things, these do not pose threat to the CPP. Bitcoin miners are none of them. People who are convinced Xi Jinping is not able to crack down on Bitcoin miners are fooling themselves.
The question is will he? In my opinion that is unlikely. I think he would rather try to exploit it. Chinese people tends to do their business in an indirect way.
For example what if Xi forces his miners to prevent EVERY soft and hard fork we would like to have in the future? The worst thing is we wouldn’t even have a clue.
Miner centralization might not be an issue today, but it can be easily one tomorrow. I think the right solution would be to have a backup hard fork ready in case something drastically goes wrong.
It would be preferable that miners and Bitcoin users also know about this fork and keep it in their mind at all times.
In any case, be aware of this risk and don’t try to sweep it under the rug if someone brings it up. And who knows maybe if miners see the pressure on them, they might be more inclined to act decently?