Bitcoin Q&A: Proof-of-work changes

Harry asks, “What are your thoughts on a Bitcoin
proof-of-work change to combat mining centralisation? Lately we’ve had the pseudonymous owner of, Cobra, come out in favour of a proof-of-work change. He has been voicing concerns about Bitmain
controlling ownership over three of the main Bitcoin mining pools.” The quote here is: “As of last writing, at
least 53% of the hashrate is controlled by [three pools]. This is a dangerous level of centralisation. Is this a real concern / threat to Bitcoin? Does something like a proof-of-work change
really address the core issue of mining centralisation and control? Or would it only delay the inevitable? What other options would be available for
Bitcoin to combat hidden pool ownership by large actors such as Bitmain, if such ownership
is in fact legitimate? There are good examples of other communities
trying to combat ASICs in recent times. So I would like to know why Bitcoin itself
cannot respond in a similar way. An example below.” It goes on. You can read the question yourselves but it
goes on to talk about a recent change in the way Monero does its proof-of-work algorithm
in response to the release of ASICs. I disagree. I think a proof-of-work change doesn’t combat
mining centralisation. In fact, it’s likely to make it worse. The thing about proof-of-work at the moment
is the centralisation is driven by economic factors that have a lot to do with how quickly
Bitcoin went from being [mined by] CPUs, GPUs, field-programmable gate arrays (FPGAs) and
finally ASICs over a period of about nine years. This meant that the hardware was being obsoleted
very quickly, which gave enormous advantage to those who had close proximity to silicon
fabrication plants and cheap electricity. That’s 99% where it’s concentrated, in particular
regions of China. But those incentives and that economic structure
is pretty much over. The reason for that is, as ASICs achieved
the highest level of silicon density (about 16 nanometers, moving toward 12 nanometers),
there is no more 1000x performance improvement available in the next level of density. We’ve already hit the wall, Moore’s Law applies. Now you can maybe get a 2x improvement in
performance over the next eighteen months. Even that is doubtful. At these levels of density, we’re kind of
reaching the end of Moore’s Law in the traditional sense of chip density. What does that mean? That means this ASIC equipment, when manufactured,
now has a shelf life of more than two years — not just two months. That means it can be deployed in many other
places where there are a set of favourable conditions, which include cheap electricity
and low operating cost. But [this also includes] political considerations. The concentration of mining in China is a
disadvantage for Chinese miners too, because having too much mining in one place makes
you susceptible to political coercion and extortion. It also increases the risks from natural disasters,
electricity shortages, fires in one of the warehouses, or some other situation like that. I expect we will see that the centralisation
of mining is already reversing itself. It’s going to take several years until that
plays out, but we’re beginning to see the emergence of other manufacturers making ASICs
and other locations competing for this. Let’s play the other side of the game, which
is what would happen if you did a change in the proof-of-work. First of all, that would devastate the security
of the Bitcoin network. Maybe you can do it on a smaller network like
Monero, but quite honestly Bitcoin’s security is the most robust level of security that
exists at the moment. A change in the proof-of-work would basically
reset that and all of the investment in ASICs would be wiped out. That also means all of the existing security
investment in Bitcoin would be wiped out. We’re talking about several billion dollars
of industrial-scale infrastructure that secures Bitcoin against various forms of attack. That’s not a good thing. I think it’s a very cavalier suggestion to
simple change proof-of-work. Also, I don’t think it would be effective. I think an attempt to change Bitcoin’s proof-of-work
would be a contentious issue that would not have majority consensus. As a result, it would result in a fork that
would split Bitcoin into ‘Bitcoin SHA-256’ and Bitcoin with something else. The [latter] would have a very hard time rebooting
its security. Who do you think would reboot that security
faster? Let’s say the proof-of-work algorithm is changed,
maybe made a bit more ASIC-resistant. Theoretically, the very same players who have
a couple billion dollars of liquid cash available to them, all of the operating expertise in
manufacturing pipelines and relationships with silicon fabrication, and access to inexpensive
electricity… Do you think they might have an advantage
in rebooting their entire operation and investing in the new proof-of-work algorithm? Arguably, they would gain an even bigger share
[mining] the new proof-of-work algorithm, because it would set back everybody. They would have the advantage of eight years
of experience, billions of dollars, and existing relationships with manufacturers. I think it would actually undo the effects
of competition that we’re already seeing taking hold in this space. So [I would say] “no” to a proof-of-work algorithm
change, “no” to shooting Bitcoin in the foot, in order to deal with a threat of centralisation
that is already waning. Also, “no” to giving more power to developers
or other parties who make unilateral decisions about the proof-of-work algorithm and split
the consensus of the network. “Is a hard fork still an option in case of
an emergency? In cases [where it is] needed to hard fork
Bitcoin for any reason, is that still a valid option? Now that Bitcoin has started to have a lot
of users, would that not be a big mess? In your opinion, what threat or event could
lead to a hard fork? Thanks.” I think the question here really comes down
to what we mean by a hard fork. A hard fork in itself is not necessarily a
bad or disruptive thing. A hard fork, if properly planned and supported
by a vast majority of the system, meaning the economic actors (the users, the merchants,
the exchanges, the wallets, the miners), where everybody is on board, agrees this needs to
happen, and is willing to put in the effort to upgrade their software clients to effectuate
a fork that is properly executed and well-developed with high-quality code… then a hard fork
can be done. It can be done effectively and with a minimum
amount of disruption. There are some cryptocurrencies and blockchains
that regularly do hard forks, [for example as a response] to problems. We’ve seen denial-of-service attacks in the
Ethereum network that involved poorly-chosen values for gas. In that case, Tangerine Whistle and Spurious
Dragon (funny names) were a couple of the hard forks that were introduced to solve those
problems and were executed very effectively on a fairly tight timeline. There are other blockchains that have regularly
scheduled hard forks every six months in order to introduce new features that are backwards
incompatible. That’s generally not the development culture
in Bitcoin; Bitcoin has a much more conservative approach to its software management, probably
because there’s a lot more at stake, it’s a much bigger economy and user community. Nevertheless that doesn’t mean a hard fork
can’t be pulled off. Contentious hard forks, where a small part
of the network wants the fork but the majority doesn’t, those are very problematic. These can lead to chainsplits, as we’ve seen
in the past. You asked me what threat or event could lead
to a hard fork. Let’s say, for example, that a fatal flaw
was discovered in SHA-256 which would very quickly lead to a compromise of the proof-of-work
algorithm and a weakening of the security of the chain. It’s very likely that under those circumstances,
there would be a broad move to change the proof-of-work algorithm. That would be quite disruptive. The reason is, there is a lot of deployed
infrastructure in the form of ASICs that would become obsolete with that hard fork. That would require a refresh of all the mining
hardware. That’s not entirely impossible. Keep in mind that up until very recently,
as the pace of development in ASICs was frenetic, many of the mining companies developed the
skill of being able to completely refresh the majority of their ASIC infrastructure
every six months. Those ASICs were basically becoming obsolete
within three to six months of being deployed. So it’s not unthinkable that you might need
to / be able to execute a proof-of-work algorithm change. The mining companies (if it was in their interest)
would not only go along but would be able to quickly refresh their hardware infrastructure
within six months. Another possible event would be discovering
a fatal flaw in ECDSA. Discovering some kind of weakness or discovering
a widely available, powerful enough quantum computing system. That could start negatively impacting the
security of ECDSA. In cryptography, these things generally don’t
happen overnight. Cryptographic algorithms that have had flaws,
like the Data Encryption Standard (DES) or MD5 or SHA-1, they didn’t just fall apart
overnight. They didn’t go from ‘completely robust’ to
‘completely useless’ overnight. Instead what happens is, weaknesses were found
that changed the effort required so that it became feasible for very well-funded adversaries
to start attacking these algorithms. But only over long periods of time. Still, there was plenty of time for organisations
to re-tool those algorithms. There are exceptions to this rule, of course,
but generally speaking cryptography weaknesses do not fatally compromise an algorithm once
and for all, overnight, and in such a way that everyone can break it. Instead they weaken it such that, in six months
from now, we anticipate you can [break] it for less than $10 million and less than one
warehouse full of equipment. So we’d better start changing things up now
to protect against that eventuality. In those cases, we might need to implement
a hard fork. But then again, some of these problems — perhaps
many of these problems — can be solved with a soft fork too. It remains to be seen. I think [a hard fork] would still be a viable
option in an emergency.

38 thoughts on “Bitcoin Q&A: Proof-of-work changes”

  1. ?? crypto is the future!
    Not just buy/sell ->get rich quick…no!
    Buy and hooooolllld ? and let the system crumble ?

  2. Whenever I hear the music at the end, I air guitar and prentend I'm on some secluded beach in the Greek Isles.??️??

  3. Plz in your next mastering bitcoin print show us the steps to run a full node in a rasbary pi connected to go tenna then connected to blockstream satalite or full node directly connected to the blockstream satalite and a lighting node….:-)

  4. Question: The standard shelf life of cryptography is 20 years. What would you advise BTC community do within another 10 years?

  5. In the current proof of work setup, the objective for the miners is to find a block header with a hash value, that is smaller than some target.
    With rising mining difficulty, the number of potential hashes of valid blocks shrinks, and therefore the chance of a collision, where two blocks have the same hash, rises.
    What do you think of changing the proof of work, such that the difficulty constraint is not imposed on the hash of the block header, but rather "some different" hash of the block, that is only used for proof of work and not for referencing the block.
    For example, a "hash field" could be added to the block header.

  6. Ya, and what you are describing sounds a lot like Bitcoin gold,
    a crypto that was recently 51% attacked.

  7. Everything @aantonop is talking about in this video was proved by the latest 51% attack to the Bitcoin Gold network…

  8. Question: Isn’t Github Centralisation? Take it down, 0 progress. Wipe it somehow, set back years no?

  9. ASICs is a natural progression. Just need more competition within manufactures of ASICs. This is coming. Having no ASICs would make you vulnerable because when ASICs are invented they would temporarily have a huge advantage making a 51% attack much easier.

  10. Apple is working on its A12 chip using 7nm lithography. Doesn't this mean we are still a lonh way off the end of moore's law in regards to asics?
    Also, what about the possibility of Bitmain holding a majority of the mining power by Bitmain themselves mining with their newly developed asics and then releasing those used asics as new to buyers once the development of their latest asics is finished? Isn't that a good reason for changin PoW?

  11. BCH did hark fork twice since the chain split and didn't have any serious issue. The fact BTC never hard fork will be problematique in the future. Doing regular hard fork is a nice drill!

  12. Dont waste the heat than mining is energy neutral. Build devices that generate hot water all over the world. They can pay them self.

  13. Hi Andreas just a quick question what’s your thoughts on the ico contract vault any info would be appreciated many thanks

  14. Does the slowing down of mores law mean the scalability will be affected by the miners not being able to increase the hash rate as much?

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