Topic: Bitcoin is no longer decentralized - page 4. (Read 8359 times)

Bitcoin will be forced to become centralized or it will crash.
This is another reason why you should diversify. PPCoin is better because it shouldn't have "need" to become centralized. Transaction volume matters.

1.   http://www.youtube.com/watch?v=EIIkHfU2o8Y
2.   http://www.youtube.com/watch?v=ZEgj_whkg08

Centralization is not a prediction, it is a fact!

Every problem in society and economy is self-correcting. Sometimes it takes 5 minutes and sometimes it takes 100 years. Sometimes hardly anyone is noticing it and sometimes it is like a seismic shift. The point here is to avoid seismic shifts.

The future of ASIC production is to make the ASIC chip like a Swiss army knife capable of switching between different POW algos as the need arises. Field of competition will be how this switches are optimized between different pairs of POW algos. It may sound absurd but professional investing in ASIC production is the first worrying signs of centralization. Risk must be too big for a professional investor to make a bet for a single POW algo optimized ASIC chip. Only then we can say that the danger of centralization is not there anymore.

 Well I come down to bitcoin fury back in the 266$ days which was very recent , and giving that by that time it was already hard to make bitcoin comparing to couple of years ago , it was already decentralized back at march , so its not something new , hell some of us newbies here thought bitcoin was decentralized back when we started. We just hope it is not greedy bankers thats all.

Except it already has occurred. Anyone who hacks BTCGuild's systems or coerces its operator can happily reverse transactions that have reached six confirmations with a 21% success rate. 2 confirmations with a 53% success rate.

This is a direct result of the consolidation of hashpower which wouldn't exist absent it. It violates the security assumptions of the system.

We don't iterate MD5 more when its security assumptions were broken, we replace it.

See above.

We also have only about ~3000 stable inbound connection listening full nodes on the network according to the DNS seed crawlers.

We agree here (amazing) and I've had a similar experience to you. I am currently mining on P2Pool and I am a substantial fraction of its hashrate, not because I care for the variance reduction, but because I support P2pool and want miners who do not want the high variance of solo mining to have options which don't require delegating their mining authority over to centralized pools.

I have talked to easily a thousand people about Bitcoin. Hundreds of miners. I am a moderator in the mining subforum here.  It is my experience that your views are highly unrepresentative— not unique, but I could basically count the number of similar views I've heard on one hand if I exclude the developers who only have a few GH/s of toy mining.  If I thought your views were common I wouldn't be concerned.

Funny, responding to a pool behaving maliciously is not among those "modes". Luke's bfgminer stuff actually will detect a number of cases of bad pool behavior (like attempting to fork a chain it had previously mined on) and switch away. Con is completely uninterested in merging that or any comparable feature.

I'm curious what poolserver daemon you run.


I cannot think of a single feature in cgminer which is associated more with network health than short term hasher income.

The failover functionality also unfortunately means that if you compromise one large pool you can DDOS the others in order to drive the hashrate up on your compromised pool.

This is objectively false. For example, when P2SH went active on the network, 50BTC was asleep at the switch and for over a month almost every block they mined was orphaned. They lost no hashrate during this time and today are the second largest public pool.

BTCguild, before they went PPS, went through a months long period of "bad luck" which had one in a zillion chance of actually occurring based on chance. The cause was never explained. Today its the largest pool.

Some popular "gui" mining software botches its failover and has hundreds of gigahash of wrong usernames and passwords show up on other pools when their primary fails. It goes unfixed for months/years.  When a major pool goes down there is an observable loss in network hashrate, in spite of the really fantastic failover abilities in miner software— as you note, the pools are unreliable, and the miner software has great failover, and people don't avail themselves of it.

Pirate (and friends) ran an operation which was paying people to run their mining through them while concurrently running his ponzi operation and paid astronomic PPS rates as high as 150% PPS at times. He gave conflicting explanations of how the hashpower was being used, none of which could possibly have paid for those PPS rates.  He claimed to have a near majority of hashpower flowing through his systems at one point, the SEC reports over 23,000 BTC mined by his operation. Several other parties have also run large pay to hash operations and received large amounts of hashpower.

If a pool starts doing something evil will miners switch away from it — on the timescale of days, sure. Hours? No.  I don't believe anyone can say with confidence that a day-scale malicious reorg event would be survivable.


What am I wrong about?   BTCguild— months of 40% returns. #1 public pool.  50BTC, ~1 month of mostly orphaned blocks due to misconfiguration, second largest public pool.  Slush, hacked multiple times thousands of btc stolen, third largest public pool. Together they are a simple majority of the hashpower.

P2Pool plus solo mining (assuming we exclude the large mining corporations like asicminer) are _no more_ than about 4.3% of the total hashpower, and probably less.  The position you are expressing is, sadly, a demonstrably minority one.

As someone who was deeply involved in the recovery of that event I can't say I agree with your characterization of the situation at all.  A tiny minority of nodes had rapidly deployed new Bitcoin software, if not for the tremendous consolidation in hashpower— making that tiny minority have a large supermajority hashpower, the fork would have resolved naturally.  The miners who's blocks were orphaned in the change were paid for their loss.

You keep saying things that make me wish I could duplicate you, which is a very odd feeling because I have fairly low respect for you outside of your support for the network.  Still, I don't think that we can dispute that your experiences are unrepresentative: Solo mining is a tiny fraction of the hashpower.

At one point we had something like 20,000 stable reachable full nodes. At one point I knew a dozen people who solo mined. You are not talking to some newbie here who is repeating the same old uninformed concerns, I never complained that gpus or asics themselves were a centralization problem.

BC.i webwallet users out number all time downloads of the reference software by a significant multiple.  There are so many different ways that the Bitcoin economy and network has more single-point-of-failure risk than it did in the past now— and only a few ways that it appears to have less (more working client software, and viable exchanges are things I'd call out as having improved).

I am not saying that Bitcoin is doomed or that things will not improved. If I believed that I wouldn't waste my time working on it or discussing it with you here.  But I think we need to frank and clear about the risks and concerns we have with the system if any correction is to happen prior to a devastating event which we may or may not survive.

If the crypto currency population move their interest from Bitcoin to an alt-coin, miners will be forced to support a change in Bitcoin's proof-of-work algorithm irrespectively of how huge investments they have in SHA-256. Better lose something than lose everything! Of course, prior to this forced change they will try to crash the rising competitor using all the computing power and financial leverage they have in hand.

It's not about asics, it's about mining pools and nodes.

Zangelbert is right.  centralization is not going to occur.

as far as altcoins are concerned, i do not consider them a good example to compare to Bitcoin.  they do not have the network effects to compete.

please elaborate on what you mean.  this is too vague.

please provide some form of statistical evidence to support your claims.  all i see is BTCGuild right now with 33% of the mining pool.  big deal.  i remember when DeepBit had in the 40's% and everyone was screaming the same FUD.  then it was AsicMiner.  then it was BTCGuild again.  all these pools are only composed of individual miners who can defect the moment they detect abuses by their pool operator.  


well, i am.  i run a solo mining operation and quite frankly, i find my efficiency to be much greater than running on the pools.  i believe this is b/c i slavishly tend to my miners and fine tune them to my own specifications and performance measures.  i have literally no down time in comparison to the pools which as you say are constantly being ddos or down for one reason or another.  i constantly hear ppl complaining about their yields.  well, they should solo mine.  they'd be better off and we'd be more decentralized.  

another thing you're failing to account for is human motivation for a cause.  motivation to be a part of a new system that puts control of a form of money into the hands of the ppl.  this is another reason i solo mine; b/c i know its the right thing to do for decentralization and i would do it at a loss if i had to.

i don't think you mine.  if you did, you'd be amazed at cgminer.  there are various modes built into the software that will allow instant shifting to backup pools just in case something goes wrong in the primary pool. and there are all sorts of options to switch if a pool slows down.  there are too many to list or remember.  bottom line is individual miners are vicious; they will switch pools at the first sign of trouble and won't tolerate any BS from the pool.  operators better behave themselves or they will lose there participants quickly.  they have no control over them.


you're very wrong here.  as i said above, you wouldn't understand the mentality of a miner unless you're doing it or take pride in it.  they/we are some of the most efficient and anal ppl i know.  i don't tolerate pool operators b/c i know i can do it better myself.

that's a ridiculous comparison.  the only reason the Fed stays in business is thru the use of force.  we can't supplant them.  they force us thru the rule of law to use their fiat while they literally force $85B every month down our throats.  except it's not our throats, it's the primary dealers who get to turn around and speculate on stocks, bonds, and commodities.  they can screw up ad infinitum thru Greenspan, Bernanke, and now Yellen and no one can hold them accountable.  whereas a pool operator is operating in a free market.  if they try to cheat, collude, or inflate they will be punished by defection.  even Eleuthria understood that he couldn't become more than the high 40% range of the network and refused to take any more participants.  he also understood the concept of bringing along the entire community early on as demonstrated by his magnanimity in the hard fork last Spring.  he, being around high 40% of the network at the time, knew that he could not afford to leave merchants in the 0.7 fork.  he would lose by winning.  by winning, i mean mining all those extra blocks while on the 0.8 fork that had been created.  we all know what happened.  he backed off, gave up 25 block rewards mined on 0.8 for a loss, and returned to 0.7 to rejoin the merchants.  a brilliant example of game theory working out in the Bitcoin system where a big mining pool capitulated to save the system.

i'm not worried about that.  data storage capabilities are growing exponentially.  storing a blockchain today is nothing and will continue to be so for a very long time.  i keep 5-6 full nodes operational just to support the network.

i've been listening to this argument about increasing centralization as a result of asic's for a long time now and it's just not happening.  you may think it is but it's not.  yes, it will be harder for the individual solo miner to make money but it's always been that way.  it's just relative.  asic mining equipment costs are plunging now.  and they will continue to plunge.  i am actively working in the asic mining space as we speak and i am aware of a number of players coming to market.  to be quite honest, it's frightening for the companies and the big players as they all have to compete for market share.  the only way to do that is to cut prices or offer extremely consumer friendly mining protection programs, etc.  there are even "secret mines" being set up to compete with the pools and the hosting companies.  this competition is only going to increase.  why?  b/c it is a truly free market and there is tons of money to be had.  competition is flourishing.

you're forgetting that monopolies like the Fed or Paypal are extreme cases of centralization that can only exist in controlled markets organized to create unfair advantages.  we don't have that in Bitcoin.  hopefully never will.

we went thru this fear with gpu's and we are now going thru it with asic's.  the outcome will be the same.  self correction.

Evidence in the altcoins and in other security systems suggests its not. One alternative, indeed, is to "correct",  but correcting has great expense— one which is borne exclusively by the correctors but which confers benefits primarily to the general public, a failure to support decentralization is largely an externality.  Additionally, the need for correction is not obvious to most users of the system until there is a massive failure— this kind of security is brittle—, I could argue that this thread is evidence that people are not completely unaware of these concerns, but here you deny them. There are low/no cost changes participants in the system could make (move off of centralized mining pools to P2Pool, run full nodes for wallets if you can, SPV instead of webwallet where you can't, run additional full nodes for the network even where you don't run a wallet, refuse to provide funding to centralized mining datacenters) which few people appear to be taking. The massive failures required to trigger correction would underscore that the core security premises of the system are not currently or automatically true, eroding confidence.  Without confidence Bitcoin has no value.  And everyone has another alternative: don't use Bitcoin.

Some of the most popular mining pools have been hacked over and over and over again, three and four times. Their reputation is fine. A large portion of hashers do not know or care.  Someone attacking the system would be interested in shutting it down completely and/or profiting off shorting it. They don't necessarily have to be those "trusted" parties, they may instead be someone who has hacked or coerced them.    Your argument with respect to reputation could just as easily apply to the FED or Paypal, and yet they continue to stay in operation and continue to behave in ways which people find to be unethical or untrustworthy.

Bitcoin is supposed to be based on stronger stuff than that.

This also ignores that a sufficiently large reorg is unfixable without leaving some people robbed. You can end up with two chains with loads of mutually exclusive transactions and absolutely no way to determine who are the honest owners and who are the thieves: it's one persons word against another.  The actual miners causing the reorg don't even need to be parties to all the theft, it can simply be opportunistic theft that happens during the consensus failure.

The majority of the users are not participating in the Bitcoin protocol, they use thin clients and hosted wallet services which do not enforce the rules.  As usage grows it is a distinct possibility that operating a rule enforcing node will become very expensive— requiring multiple gigabits per second of bandwidth in the "scales to visa" examples given by some— so it's not at all clear that they even could respond to such a threat by changing their behavior due to economic constraints.

Self-correcting problem.

More than that, I'm not sure how anyone who understands Bitcoin (the ecosystem, not just the protocol) can fail to see that this is self-correcting. Obviously there are more coders here than free-marketeers. Does coding predispose people to see other humans as automatons dead-set on their course, unable to react to change? If not, how is it that no one is talking about the only thing that matters here: the way incentives will change for all parties as various trends progress?

So six guys operate the mining pools. So what? Paint me a scenario. The most damning one I can imagine is if a majority of the six (or all six) insanely decided to destroy their own business and credibility by doing a 51% attack or breaking the 21M coin limit. Immediately everyone sees what's happening, immediately there is easy consensus by everyone to do the obvious thing and roll back that block or two (a consensus that is unattainable except in such extenuating circumstances). Damage to Bitcoin's rep is temporary even for this extremely low-probability scenario, while damage to the mining pool operators' reps is permanent. Moreover, we'd instantly have a new social norm of avoiding (or maybe even boycotting) any mining pool that got remotely too big.

Any other scenario seems even less of a concern.

Bitcoin is just a community of people with free access. Its power is highly decentralized, and its mining is as decentralized as most people think it needs to be. If they are wrong, the damage is temporary and subsequent damage of similar type is prevented for all eternity afterward. Bitcoin (the mining/node community, a group of humans) is not held together by the protocol or blockchain as it is propagateda at the whims of 6 mining pool operators, but rather by their agreement on the rules that constitute the Bitcoin protocol. The bottom line is that the mining pool operators don't have the power to change THAT. The power to change that is the only thing that ultimately matters, and that power is radically decentralized.

Solar power, yo. Miners should start shipping with solar panels.

Do not confuse delta-t with the amount of waste heat. Ability to operate at high delta-t is limited by semiconductor technology.  Indeed, if we really did have high speed logic that worked with high delta-t then your options for making productive use of the waste heat would be broadened beyond low level heating applications, and the argument that hashing is more efficient decentralized wouldn't fly, but we don't currently (and this is something which is very much desired even outside of bitcoin mining).

Doesn't the slush pool contribute to 30% of the network hashrate?

You're completely wrong.

If I have one miner putting out 100W of heat, I don't even have to worry about cooling: that 100W of heat is insignificant. Remember the cube-square law: volume increases faster than surface area, and it's surface area that lets you cheaply cool things with no dedicated cooling infrastructure.

If I have a bunch of miners, putting out a few kilo-watts of heat, I need to do something with the heat, but I can easily make use of that heat by just keeping my house warm. In the summer I can just turn those miners off, or maybe even put them in boxes and mail them to someone on the other side of the planet. The infrastructure required to do that is still incredibly cheap, at worst you might want to install some fans to spear the heat produced to the rest of the building. Here in Canada most houses already have that infrastructure as central furnaces with air ducts running everywhere are standard. I can do this on a larger scale too, say to heat up an office building, and again hardly any new infrastructure needs to be bought. (why bother with phase-change crap when fans work just fine?)

But if I have a significant chunk of the network's hashing power we're talking tens of megawatts worth of power, probably gigawatts in the future. Given that the heat is produced at 100degC at most (and can't be produced at a higher delta-T) it's pretty much impossible to find something useful to do with it, and you're going to spend a tonne of money getting rid of it - you'll find yourself out-competed by the small scale miners heating buildings.

You know the only reason people don't already have little data-centers in their houses to keep warm is because in reality there just isn't much of a market for compute-intensive tasks - your average data center has huge amounts of money invested into high-speed data connections, not to mention security. Bitcoin hashing is just the first example of a profitable and almost purely computational task.

Well if you a currency that's really decentralized the only way to do it would be to make one that requires human labor.
The rest will always lead to centralization.
I've thought about an idea for an alt coin with that theme.
It'd be called labourcoin and it'd be mined by typing in random strings of letters.
The average typing speed is 40 words per minute, so it'd be 2400 words per block, which would equal one hour of work.
It'd also have a 5% demurrage fee to control inflation, like freicoin.
It'd be more of a novelty more than an investment though.
But I can't code for jack so its just an idea. FOR NOW.

This. I run my bitcoin mining equipment at a loss of maybe $5 a month. 16 cents a day won't make me go bankrupt.

It is not easier to remove small amounts of heat than large amounts.  The laws of thermodynamics are pretty old and largely uncontested.

Utilising the waste heat is also much simpler with a greater temp differential.  For instance, you can start generating steam at 100 C, and use that steam to heat appartments, while reliably keeping the chippery at 100 C with phase-change cooling   This, of course, requires *many* chips & an infrastructure to become profitable.  Good luck putting that heat from a single miner to use.

Sub-phase-change temps are also fine with scale -- preheat water to 80C, and feed conventional steam generator -- PROFIT!

People misunderstand the problem with ASICs:

Hashing itself tends towards decentralization because it's far easier to remove a small amount of waste heat than a large amount - often you can even put that waste heat to good use for heating in cold climates etc. The fixed costs are pretty low so on a $/hash basis the market will tend towards decentralized hashing. The people making business plans around "enterprise" scale ASIC mining are IMO foolish and will find their businesses uncompetitive as the cost of power and cooling becomes more important.

Mining is currently also decentralized because the fixed costs of running a full node are low. If the blocksize limit is raised however this may not be true in the future. (it certainly won't be if Bitcoin becomes a significant world currency without off-chain transactions or some other solution)

Manufacturing ASICs is not even remotely decentralized. While there are a decent number of companies designing ASICs - and could be a lot more - the actual manufacturing of cost-competitive chips is another matter. Chip fabrication facilities these days are so expensive that the entire world economy doesn't appear to be able to support more than about three companies leading edge capabilities, and that number may very well drop further in the future. There are more companies that can build non-leading-edge chips - that is obsolete ones - but those chips just aren't competitive on a $/hash basis. It would be quite possible for Intel, TSMC, and GlobalFoundries to refuse to make Bitcoin mining hardware unless, say, the hardware itself gave them a cut of the profits or perhaps required transactions over a certain value to have an additional signature from the government for anti-money-laundering purposes. There's absolutely nothing we can do technically to stop this from happening with the current proof-of-work algorithm.

The only way to prevent that scenario is by having a proof-of-work algorithm that is cheapest to mine on hardware that will always be available as a commodity consumer product. That was the idea behind Litecoin's scrypt, although the implementation was botched and you can make ASICs that mine Litecoins with greatly reduced costs compared to commodity GPU's, albeit with a lot more up-front costs. (the ASICs would have to be significantly more complex than SHA256 mining ASICs) I personally think such a proof-of-work algorithm is possible, although there will always be some amount of improvement possible by custom-made hardware. Still we can do a lot better than the ~100x $/hash difference between commodity and custom that SHA256 has.

In any case, Bitcoin's proof-of-work algorithm isn't going to change due to the huge investment miners have made in SHA256; if the centralization of SHA256 ASICs becomes a problem it'll be an alt-coin that replaces Bitcoin that changes the proof-of-work.

Based on my experience bitcoin mining never was a definitely profitable endeavour.

Exchange rate fluctuations spoiled the fun pretty much and GPU farms quickly flooded the network.

Depending on how you define "Bitcoin"— if you mean the thing that most Bitcoin users use, ... most Bitcoin users use a couple webwallets and SPV clients. SPV clients cannot prevent inflation in our current blockchain protocol, and webwallets may not— at their own preference and whim. I believe that most Bitcoin users are trusting the behavior of a half dozen people or so to prevent inflation.  No _one_ perhaps, but six people? That is another question.

There is currently such an option, but with mining under the control of just a couple entities it could go away. They could happily only mine transactions created a certain way or obeying whatever new rules they wish to impose.

I think the thing we try to achieve with decentralization is not just freedom in practice but freedom which is infeasible to remove. It might not look likely that these freedoms will be removed in the short term, but I think we cannot say that it is currently infeasible.