The always-relevant Marty Bent<\/a> had Spiral<\/a> developer Matt Corallo<\/a> on his podcast<\/a> this week to address the freaks about urgent Bitcoin mining matters.<\/p>\n To bring everyone up to speed, the concerns stem from recent sleuthing of the blockchain which revealed that some pools have been getting perhaps a little too cozy. <\/p>\n How do we know this? Well, everyone\u2019s favorite snoop mononaut recently pointed out<\/a> that an unusual percentage of Bitcoin\u2019s mining reward was being consolidated under the control of a single custodian. <\/p>\n How bad is it? Well about 47% of the hashrate<\/a>, on a good day. Yeah, pretty bad. <\/p>\n Now why in Satoshi\u2019s name would they do such a thing, you ask?<\/p>\n To begin with, have you looked at the hashrate chart lately anon? You practically can\u2019t tell it apart from the US debt hockey stick. Backed by hardware advancement, public balance sheets, and increasing forays into cheap energy sources, Bitcoin mining has become an arms race. Since the Chinese mining ban of 2021, the network\u2019s hashrate has more than quintupled. <\/p>\n The effects this has had on miners\u2019 margins are self-explanatory. Everyone is squeezing each other out. The recent bear market saw a bunch of consolidation, particularly on the Western front. At the pool level, Foundry has been the biggest benefactor with nearly 25% of the current hashrate, down from 35% last year. <\/p>\n The reason they attained such dominance so quickly is something Bitcoiners are well acquainted with: volatility. In this case, it\u2019s more often referred to as variance. Others simply call it luck. <\/p>\n Luck, under the conditions described above, can make or break your business. It\u2019s the reason pools exist in the first place. Proof-of-work is a random process and randomness is the bane of cash flow. By combining your hashrate with others, you improve your odds and, perhaps, manage a more reliable revenue stream.<\/p>\n This is important because when your bills come due every month, your utility provider doesn\u2019t care about your misfortunes. The tighter the margins, the more vulnerable you are. In today\u2019s competitive environment, it\u2019s a matter of survival. <\/p>\n What does any of this have to do with Foundry? <\/p>\n Well, it turns out another way to smooth over miners\u2019 income is to adjust your pool\u2019s payout scheme and completely remove variance from the equation. How? Simply pay them for their work regardless of how often you might mine a block. A process referred to as FPPS (Full Pay Per Share)<\/a>.<\/p>\n If that sounds expensive to you that\u2019s because it is. The pool effectively has to front every payment out of pocket and hope they can pay themselves back with the blocks they eventually mine. If you hit a bad streak and your balance sheet isn\u2019t strong enough to absorb the lack of revenue, you\u2019re Sam Bankman Fried.<\/p>\n Enter Foundry. Through a combination of uncanny timing, business savvy, and a DCG-sized war chest, they\u2019ve created a financial moat around their pool operations that makes it very hard for smaller players to come in and compete. <\/p>\n Of course, it\u2019s slightly more complex in practice, but that\u2019s pretty much the gist of it. <\/p>\n Back to our little posse of pools and the mysterious custodian. Have you figured it out yet? <\/p>\n The same game is playing out on the other side of the pond. It\u2019s very likely that the emergence of Foundry as a major player exacerbated the dynamics laid out above and forced smaller pools to capitulate. <\/p>\n The execution appears to be slightly different but it\u2019s essentially the same model. We can validate that several pools now share the exact same block templates. This matches with reports that Antpool is offering white-labeling services. <\/p>\n That\u2019s right \u2014 proxy mining is, apparently, a business model. <\/p>\n On top of this, the aggregation of coinbase outputs suggests that an even larger percentage of the hashrate seems to be financing their operations through the same provider. <\/p>\n To put it another way: a single entity writes the checks for almost half of the network\u2019s hashrate.<\/p>\n Dollar dollar bill, y’all.<\/p>\n As you would expect, this situation led some talking heads to raise some alarming questions about mining centralization. For context, this is not the first time mining gets awkwardly consolidated.<\/p>\n Seems every cycle there is a doomsday mining centralization brouhaha and like clockwork someone panics and says we should press the red button.<\/p>\n 2008-2012 the advent of GPU\/ASICs<\/p>\n 2012-2016 network latency lead to GHash<\/p>\n 2016-2020 Bitmain manufacturing monopoly<\/p>\n 2020 till today\u2026<\/p>\n \u2014 Alex B (@bergealex4) April 25, 2024<\/a><\/p>\n As I wrote in this week\u2019s Weekly Re-Org, time is a flat circle. The Proof-Of-Work centralization Manbearpig comes out of his cave every cycle. It\u2019s a seasonal happening. <\/p>\n What\u2019s rather unusual is for one of the most senior developers in this space to go full DEFCON 1. <\/p>\n Let\u2019s work on a PoW change now.<\/p>\nC.R.E.A.M.<\/h2>\n
If what you say is true. The Shaolin and the Wu-Tang could be dangerous<\/h2>\n