This is a common misconception. Miners are the slaves, not the masters. Protocol changes require primarily the agreement of the majority of the economic power of the network. In theory, if everyone who actually uses Bitcoin - exchanges, eWallets, merchants, end users - switched one day, miners could try mining for the old protocol all they want but their blocks will be rejected by the network and be worthless.

In practice, having a majority of current miners leave will create a shock in the generation rate, and the difficulty adjustment algorithm doesn't handle such things well. But changing the hashing algorithm is actually easier in this regard, because you'll need to hardcode a new difficulty value anyway. There could be a brief period of vulnerability while people adjust to the idea of being able to mine on their CPU.

Oh, I didn't say it would be easy. But the protocol was designed so that things that should be changed, can be changed, if there is a good enough reason and someone makes a case for them and achieves consensus. The only thing which is fundamental and must never be changed is the coin generation schedule. And that's not due to something technically special about that part, just that nobody in their right mind would agree to change this.

Like I said, miners aren't all-powerful. They do have some bargaining power, which is more reason to do any necessary changes sooner rather than later. The change can be gradual so the people who are already invested won't lose their investment entirely.

None taken and I agree. And I say this as someone who mines, has been fascinated for years with the concept of monetizing distributed computing and was initially drawn to Bitcoin in large part due to its enabling of it, and whose primary skilled contribution to Bitcoin is analysis of mining pools reward systems.

But I think that people are vastly underestimating now the magnitude of the problems Bitcoin will face in the future related to the economics of mining. Maybe "mining for the masses" could play a part in the solution.

No, he means that specialized GPU miners in equilibrium will be close to breakeven and so spend ~$5 electricity per BTC (which ignores all other costs, but whatever), while he as a CPU miner will have to spend $50.

The jury is still out on whether this is a problem. Having ordinary PCs viable for mining causes a significant botnet risk, and while the idea of everyone being able to mine is appealing, it's not essential.

If this is agreed to be a problem, the hashing function can be changed to something for which ordinary PCs are more suitable, and it's possible this was Satoshi's plan.


I doubt that, GPGPU isn't exactly news. He might have not known a priori exactly how good GPUs are for SHA-256 but the idea would certainly have occurred to him and he could have investigated if he thought it was a relevant problem.

I doubt that, someone who understands probability (which Satoshi does) and expects that many people will mine (which I believe he did), can't think that solo mining will be feasible.


This has nothing to do with it. This isn't computing in general becoming faster, it's about specialized hardware for this specific purpose putting people using commodity machines at a disadvantage. "Computing power increasing with time" benefits pros and amateurs equally.


You're ignoring capital expenditures. At-home miners are leveraging existing hardware giving them a huge advantage over specialized businesses. To specialize mining, the advantage of the specialized hardware should be equally huge. This is the case with SHA-256, but not necessarily with a function chosen to require resources similar to the average PC.

Very nice. A few comments:

This will alienate some (most?) people. I'd go for "Protect your wealth from devaluation due to inflation."

I'd remove this. That this is true at all is debatable (buying with bitcoins, where the alternative is to keep your bitcoins and buy the same thing with dollars, increases bitcoins supply and could decrease their value. Buying with bitcoins, with the intention to replenish your bitcoin holdings by accepting Bitcoin payments yourself, does increase their value, though), the magnitude of the effect for an individual is negligible, and it makes Bitcoin sound like some game.

This is one of Bitcoin's major advantages and should be expanded. Talk about how Bitcoin ubiquity could spare both the hassle and fees of currency conversion for traveling and internet shopping, the conversion fees easily being 3% on top of the transaction fees.

I'm not an expert but I think this is wrong. Bitcoin uses some set of cryptographic primitives, which AFAIK are ECDSA for digital signatures and SHA-256 and RIPEMD160 for hashing. Banking and internet banking use their own set of cryptographic primitives, which will differ between banks and may or may not overlap with Bitcoin's.

Until recently you could safely say that no encryption at all is involved with Bitcoin. The newest mainstream client added wallet encryption, but that is a software implementation detail and not core Bitcoin. Wherever possible one should use the term "cryptography", which is more general and includes hashing, signatures etc. Also, see above about "the same as in online banking".

This section should be expanded.


Finally, there is almost no mention of what I think is one of Bitcoin's major selling points, at least from a philosophical level, which is the ability to store your own savings securely without requiring the services of a third party (unlike cash which can be easily stolen). This isn't right for everyone given the very challenging nature of protecting it simultaneously against loss and theft, but having purely digital money allows very flexible access schemes, and it's important that people have this option if they choose to invest in adopting a solid plan (e.g., a 2-out-of-3 password protection scheme protects against loss and theft of up to one source. You could memorize one key, store one key in a safe at home and give one key to a friend). And it's like a piggy bank where the elaborate plan is required for getting money out, getting savings money in is easy.

Chapter 3 is complete.

The latter.

+1. It's great when someone develops wonderful things voluntarily in his spare time. It's even better when someone develops wonderful things as a full-time job.

He asked about why you're waiting for the exchange rate to increase to collect payment.

And I'm guessing it was tongue-in-cheek.

Is there a listing of which block was found by whom? I think one of these blocks was me. I brought in my 1.8 GH/s earlier this week.

Indeed that's what you should be interested in, specifically over a sufficiently long period of time. But if this quantity didn't drop with presence of hoppers, you have a bug in your simulation. If you post the code I'll try to find it.

The issue where your own hashrate is fixed, but the pool's hashrate changes and is higher early in the round, so less of your shares are in shorter rounds than would have been without hoppers, is not a red herring. It's the crux of the whole matter, and if you don't understand it you won't understand why pool-hopping causes continuous miners in proportional pools to earn less per unit of work than they should.

I can write tables with actual numbers if you think this will help you understand. But if you won't listen to theory, simulation, practice, and thought experiments, what else can I do?

Your own hashrate is fixed. The pool's hashrate varies because hoppers come and leave. You have 1% of the pool's average hashrate, but this means you'll have less than 1% early in the round and more than 1% late in the round. That's the whole point.

If you maintain 1% of the pool at all times it means you're doing partial hopping yourself, reducing your hashrate late in the round.

If you're talking about PPLNS then no. It pays shares from previous rounds so it doesn't matter at all how many shares are in the current round.

But more of your shares will be in longer rounds than should be. For example, if you are 1% of the pool and the pool has a round with 1000000 shares and a round with 3000000 shares, you'd want to have 10000 shares in the first and 30000 shares in the second. But in reality it will be more like 5000 shares in the first and 35000 shares in the second, because the hoppers quit early on the long round. So your total payment will be 50*5000/1000000 + 50*35000/3000000 = 0.83 BTC instead of 2*50*1% = 1 BTC.

Integrating the renting mechanism with a pool will allow a lower barrier of entry for both miners and investors, which should lead to a very competitive premium.

Since people differ in their loss aversity, existing hardware, electricity costs etc., there will certainly be those who don't want variance, but for whom mining at stable PPS pools is currently a marginal loss. The renting mechanism will allow them to have PPS with a lower fee giving them a marginal profit, which will cause them to start/continue mining, shifting the equilibrium to a higher network hashrate.

They can do both. And they can discuss now how to make mining better so that they're ready for times when the price is high and/or the difficulty is low.

The only problem is when people mistakenly believe that Bitcoin is about mining.

You can look up the address in http://blockexplorer.com/ .

You are wrong. In proportional pools you get on average less than what you should. In hopping-proof pools you get on average exactly what you should. If you look at your rewards over, say, a month, you'll get more in a hopping-proof pool than in a proportional pool.

You may want to take a look at the analysis paper I'm working on.

Proportional pools are vulnerable to pool-hopping.

Does not contradict. Of course the most important thing now is to have more trade.

But mining exists for a reason. The more miners, the more secure the network is. By making it easier to mine in a pool, we're shifting the equilibrium to a point with more hashrate for the honest network, without any advantage to attackers.

I'm sure if he is and he wanted to tell me, he'd have done so already.