Welcome, welcome to One Minute Crypto! I'm your host, Chronos, and today I want to talk about the perils of bitcoin mining centralization First, we'll cover what it is, then why it's bad, and finally, why this problem is never going away
But first, I want to thank our sponsor, Americas Cardroom, the most trusted US online poker site Use the bonus code "Chronos" and you'll double your first deposit, and get up to $50 in free cash! Deposit with your favorite cryptocurrencies at Americas Cardroom So bitcoin, and other proof-of-work blockchains, are secured by miners on the network This is a completely open architecture: anyone can be a miner, all you need is an internet connection, and a machine to do the mining itself If you have a lot of small, independent miners, that's decentralized
But if they all team up, that's centralization So why is that a bad thing? Well, what really sets bitcoin apart from its competitors is that it's really hard to shut down Even if you knock out half the miners on the network, it can can just keep running with whatever is left But if mining becomes too centralized, it creates a much easier target for anyone who wants to control it or shut it down But here's why this problem is never going away: it pays to combine forces with other miners
We just saw this play out, first-hand The Bitcoin Cash network underwent a major stress test this month, where users sent massive amounts of spam transactions to see how the blockchain could handle it The results were really interesting, and we saw some huge blocks One big block, about 8 megabytes, came out of a mining pool called ViaBTC Because it was so big, it took a longer time than usual for the other miners to receive it, and during that transmission time, another mining pool, called BTC
TOP, also mined a block But they hadn't heard about ViaBTC's block yet, so they didn't mine on top of it Instead, theirs became a competing block This is pretty unusual, to have two blocks competing, but it's more common as the blocks get bigger, because sending them around takes longer This situation created a race: whoever mined the next block would get to choose which one would be the "real" accepted block, and the other one would be orphaned, or thrown away, leaving its creator with no mining reward
ViaBTC got lucky and mined the next block themselves, so they orphaned the competing block and took the profit But if BTCTOP had been a bigger mining pool, they might have won the race instead, leaving ViaBTC emptyhanded It mostly came down to which one was the more powerful mining pool This mechanism, where blocks can get orphaned, becomes a bigger deal when blocks take longer to send between miners
But when they team up, it's no longer a problem The result is centralization Jonathan Toomim just wrote a great article on the Bitcoin Cash stress test, with lots of data on how its bigger blocks flowed through the network I'll put a link below the video so you can check it out for yourself I'm Chronos
Thanks for watching!
