Topic: A Debate on the Usefulness of "donating" Miners (Read 2585 times)

I agree that, in reality, there will most likely be a set of miners which control some large percent of the market.  However, there is a difference between 20%, and a very small set of very large, for-profit miners (as theymos suggests).  Currently, over 50% of the mining power is locked up in pools (according to Bitcoin Watch) which means there is some distribution of mining power among a large group of people.  IMHO, in order for bitcoin to be perceived very positively by the general public, we need some large amount of distribution (for the reasons previously discussed).  Whether it should make people uneasy or not is a completely different question, but as it stands, it does.

If you continue reading the post, I said that the problem with your model of bitcoin miners is that if miners have to compete so much with each other, mining will become unprofitable for most of them, leaving us with less mining power than we had to begin with.  Although many "professional" miners can have huge hardware resources, this leaves us with only a set of "large" resources, which is much less than a very large botnet or well-funded attacker can amass.  The processing power of a bunch of "volunteers" (with medium-sized miners, ie one or two GPUs) adds up much quicker than a set of ArtForzs.

Not directly, my point was simply that under the idea that mining will be done by a small number of "professional" miners, this problem will always exist and this leaves a lot of people uneasy. 

Professional miners will have much more computing power than a network of volunteers. Professional miners need to compete against each other to stay in business: as soon as one of them finds a more efficient way to mine (software, hardware, or electricity), the network becomes stronger. This competition does not exist among a network of volunteers, and a large number of volunteers prevents this competitive environment from being established.

I think that professional miners will eventually develop such great custom hardware that even the largest botnets will be unable to attack Bitcoin.


How is any of this specific to mining? I could also have bought 400,000 BTC in the beginning for around the same price as mining it, and many people would then buy from me now at higher prices.

I agree that many volunteer miners will discover how profitable it can be, but I disagree that volunteer miners will drop out just because they are losing money.  After all the whole point of volunteering is that you take a loss to donate to someone else.  I think you are underestimating the power of "feeling good".  If you haven't seen it, the "Drive" video by the RSA is well worth watching (not the one that just got hacked but the Royal Society for the Arts). 

Although I agree that bitcoin is not in any way a Ponzi scheme, the way it currently functions for new users effectively is.  Thus, the common "why would I invest in a Ponzi scheme like that?" question that is seen when a post about bitcoin is made outside of the community.  I agree that there is some amount of investment into bitcoin, but the investment of miner's hardware is such a tiny fraction of the total value of all bitcoin, that it becomes negligible (especially when you consider that the vast majority of miner's hardware is not an investment in bitcoin, and was purchased for other reasons).  The argument that bitcoin has "developing markets" falls into the same category IMHO.  Although it exists, its total size in comparison to the amount of bitcoin in the world makes it completely useless for argument.  In the end, the adding of more businesses to the bitcoin market can make my argument completely invalid as you state, but IMHO that is still a lot of hard work on the part of the community away. 

When I say 'volunteer' I mean someone who is taking a loss, not someone who has a small amount of resources.  People who have small resources can still be profitable (especially if you dont count the cost of the initial hardware as many people already have high-end hardware for other reasons).  To your point: I agree, but that is fairly OT.

I guess I didn't make my goal clear.  The goal of the post was to argue against the idea that "donation" miners are bad as it makes it harder for profit miners to make a profit and profit miners is what we should target.

I completely agree that the cost of bitcoin is not tied to electricity (and IMHO not even really effected by unless there is a huge change, currently the price is determined almost entirely by speculation and price of electricity isn't really effecting it at all).

I agree that the non-volunteer miners will always make up a large chunk of the total mining power, however I think that continuing to have the top miners controlling some large percentage of the mining power still leaves my points on the creation of a ponzi-like system valid.  I'm not saying that mining profits are in any way bad, in fact they are a good thing for the reasons you just stated, but that mining profits is not something we have to defend. 

i think your model misses the fact that the most profitable kind of mining is gpu mining with already purchased gfx cards and computers. you dont lose all the amateurs when you switch off the coin generation in the client but only those who dont have such a gfx card or are not tech-savvy enough to use it.
i also think that cpu mining is rather useless. you need something like 50-100 cpus to get the mining performance of one gpu.

A Debate on the Usefulness of "Donating" Miners and their part in Bitcoin's long term outlook and uptake

I recently had a debate (mostly) with Blitzboom on the matter on #bitcoin-otc and decided I would post some of what was said here to open the discussion.  It is mostly in reference to theymos's quote below (which was on the thread related to disabling the built-in miner, so I decided to not respond to it there):


My objection to this is mostly due to its infeasibility in the long term in the current model of bitcoin adoption.  In theymos' proposed model of the bitcoin economy, miners only exist where it is profitable for them, ie the price of bitcoin is higher than the price of electricity.  This means that there will be relatively few high-power miners making up some large percent of the mining power (for the sake of argument, lets assume the rest of the miner's total power is negligible).  Because bitcoin mining is profitable, those who have high end cards will bring them online and sell for their costs, making the price drop and leaving only the few most efficient miners.  (Problem 1)  This creates a system in which bitcoin's price is equal to the price of electricity.  If this is how the bitcoin network always will be, there will always be a very small number of efficient miners who have some large percent of the total value of bitcoin.  (Problem 2)

Problem 1: In order for the network to function the way it was designed, we need as many miners as possible.  If mining is controlled by a few, slarge miners, it will always be succeptible to a double-spend attack by someone with considerable resources.  Take, for example, ArtForz.  Even if he were to triple his capacity, he would still not be nearly capable of defending the entire network against an attack by someone with the resources of the recent Mysterious Miner.  If several others, like ArtForz, brought similar scale miners online (as would happen in theymos' model), even them together would not be able to defend against an attack by a very large botnet or the use of a supercomputer by a well-connected attacker (say, an attacker who works at a university and is willing to take the risk to take over the entire computer for a couple hours). 

Problem 2: This is one of the largest issues with the perception of bitcoin by the average person, and is one of the largest complaints I see whenever someone posts about bitcoin.  "It is a ponzi scheme".  And as long as most new generation happens between a small community of large-power miners, it effectively is.  New users pay the miners when they join (as miners are the largest sellers), but if many of them want out, there is no support there.  As long as there exists miners which can crash the bitcoin market overnight (which would be very easy for some of the current large-scale miners such as ArtForz), the bitcoin economy carries with it many of the traits of a ponzi scheme (albeit a very open one) which makes MANY people very wary of investing.

If bitcoin is to be used by any medium to large size organizations, there needs to be very strong confidence in its ability to continue with some amount of value and with a secure network.  IMHO this idea that mining is not good for the network is ridiculous, as currently, miners are making such large profits that the first thing people see in bitcoin is a ponzi scheme and this needs to disappear on the back of more mining power.

Feel free to tear this apart.