Mining hash rate distribution

[alfredaino]

The reality is that one has to trust the various actors, without being able to verify their actions. This invalidates one of the basic principles of blockchain.

So we have to trust, Bitcoin could be controlled by the government or finance. A tool that was born to fight the banks has become part of them. So sad https://imgur.com/a/PreVIYz

Fundamentally, Bitcoin is built on the principle of transparency, at least to the extent where feasible. It would be incorrect to say that the principles that Bitcoin was built on is compromised solely because there are limitations to what we can do as far as decentralization, transparency, etc can go. Make no mistake, there are no perfect systems in the world and compromises has to be made in every of them.

For example, if you want something to be completely decentralized, then you would have to do it at the expense of something else, which can be transparency or any other property that Bitcoin has. The assertion that Bitcoin is compromised just because of what is postulated in this thread would be wrong. There are limitations to what an adversary can do with a good proportion of the hashrate, and as mentioned, it wouldn't make sense for adversaries to do so.

Since 50-60 miners control 51% of the computing power and since it is not possible to know who they are, one must trust that they are not either some private company or some government. The principles of decentralisation transparency of the whitepaper fail.

[alfredaino]

PoW works like this. The rule of the longest chain plus 51% hash power is written in the whitepaper.

Bullshit, the part what you write as "plus 51% hash power". It's certainly some time ago when I read the Whitepaper last, but I can't remember something in it to support your claim.

You do realize that Bitcoin evolves, don't you? The "longest chain" has changed to the "chain with most accumulated work" wins, for obvious reasons. There's no point in clinging to the wording of the whitepaper. It's not the Bible or the Ten Commandments.

If it is bullshit, so is the whitepaper since I got the quote from there. So you are saying bitcoin no longer follows the whitepaper? Can you report a link where I can read what it is actually following?

The reality is that one has to trust the various actors, without being able to verify their actions. This invalidates one of the basic principles of blockchain.

I disagree and I seriously can't follow you how you come to this conclusion. While it is somewhat problematic that certain mining pools aggregate quite some percentage of hashrate, I still don't see what kind of an issue it is as long as their percentage doesn't approach substantially more than 35-45%. We had in former times a pool that got to about or slightly over 50% and concerns and "shitstorm" were loud. To my knowledge that didn't happen again.

Where's the problem? Pinpoint it, please! What benefit should a party have which made enormous investments required to approach 50% of the global hashrate. Do funky stuff then and send Bitcoin into unseen turmoil? That would be economic suicide, very certain! I'd say, no government would dare to burn an investment like this to the ground, even if they hate Bitcoin. It wouldn't make any sense, economically.

The problem is that mining is so centralised and not transparent. About 50-60 miners control 51% of the hash power, we also don't have a dashboard, a tool to check the status of the network, and we have to rely on the intensive work of researchers. This is a serious lack of transparency. The government does not want to destroy Bitcoin, it is enough to control it.

[alfredaino]

After reading the OP, I concluded that there might be an issue in the study. It seems unlikely for these students from the London School of Economics to arrive at such a conclusion unless they lack a proper understanding of how mining pools operate. As a result, I spent/wasted half an hour delving into the research paper to uncover the nuances, and here it is.

This figure documents the concentration capacity of miners based on Coinbase rewards that miners receive from pools. Each month, we sort active miners
by the amount of Coinbase rewards they receive and calculate the percentage of total mining capacity controlled by different quantiles of the miner distribution.

Obviously, I do not doubt that their figures are accurate, and this conclusion

The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity

Could have been guessed by anyone who has been mining long enough, but where did they go wrong?

These individuals seem to be entrenched in the early era of Bitcoin mining. In today's world, Coinbase transactions hold little significance in such research. To simplify, the vast majority of mining pools allocate Coinbase transactions to their own addresses and subsequently distribute rewards from there. Moreover, many mining pools operate on a Pay-Per-Share (PPS) model, meaning they pay out rewards before actually receiving them (or sometimes after). This results in payments originating from a different set of coins than those visible in the coinbase transactions.

Given that almost 90% of all blocks are solved by approximately only 10 pools, it may seem as though these 10 miners control 90% of the blocks. Mining pools typically don't attempt to conceal their rewards, otherwise, they could assign a new address for each coinbase transaction. If this were the case, the entire interpretation of the study would shift drastically. Therefore, while the presented figures may be accurate, the interpretation is fundamentally flawed.

Reading the paper further, I found another critical error in their approach which is linking the origin of exchanges to the location or nationality of miners. Their assumption, based on the use of a Chinese-owned exchange implying the miner is Chinese, or the use of a US or EU exchange indicating nationality, is flawed. Common sense dictates that this inference is far from accurate. Unless exchanges reveal miners' information to these researchers, which is highly unlikely, their methodology only exposes the identity of mining pools rather than individual miners.

In essence, this research may suffice for academic purposes in obtaining a master's or bachelor's degree, using it for anything else -- is a mistake.

A reasonable answer that seems to address the problem. Assuming there are the problems you have identified, do you know how to solve them? Also, the other research seems to get similar (same) results. They could both be wrong, but you need evidence to prove the invalidity of the research.

[alfredaino]

Im not talking about game theory. I simply pointed out that the operator of a pool could use their users hashrate maliciously before anyone had a chance to move their hashrate off the pool. Effectively when looking at short term attacks like double spends they do control the hash, not the individual miners. Their incentive to do so is completely irrelevant to my statement. Your fork tracker is useless when a longer chain is being built in secret. Sure the pool might have a few hours of bad luck, but so will the whole network if 51% of the hashrate drops.

This is a very good point and is no different from selfish mining, in which miners "hide" their generated blocks from the main blockchain and only require 28% of the hash power, according to this https://www.certik.com/resources/blog/7uiBC4AA6ex2MS9eEnkZKy-blockchain-fundamentals-key-consensus-algorithms.

Really?  Money means nothing to the government. They can print it as they please. Never underestimate what they will do to keep their backdoor inflation tool as the global reserve currency.

Do you think someone like Arion Kurtaj would have cared about economic suicide if he got access to a few pools instead of nvidia, uber and the others?

I think there are a lot of scenarios , although highly unlikely where game theory doesnt apply. I dont think people put enough stock in those.

Exactly. Also, in my opinion, the government might be interested in controlling bitcoin rather than destroying it.

[alfredaino]

You do realize that Bitcoin evolves, don't you? The "longest chain" has changed to the "chain with most accumulated work" wins, for obvious reasons.

That's actually a noteworthy fact of the Bitcoin history. The whitepaper does include the phrase "longest chain", and while most people believe he meant "longest difficulty-wise chain", he actually didn't. The "longest chain" in the whitepaper is meant literally; the chain with the highest block.

Whitepaper:
The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains. To modify a past block, an attacker would have to redo the proof-of-work of the block and all blocks after it and then catch up with and surpass the work of the honest nodes.

https://bitcoin.stackexchange.com/a/112313
However, the original release of Bitcoin did actually use the height to pick the best chain, which was replaced with "most work" after people noticed this attack surface just like you did.

https://bitcoin.stackexchange.com/a/29744
Satoshi didn't initially realize that choosing the correct chain by just counting blocks allows for some extremely easy attacks. Version 0.1 just counted blocks. That's why the paper just says "longest". The idea of "chain work" was added a little later.

Thus, the longest chain is understood to be the chain with the highest computing power or PoW effort, but was implemented incorrectly in early versions. In practice, the longest chain means the highest blockchain in the chain, which should correspond to the chain with the highest computing power according to the PoW consensus algorithm.
There are PoS blockchains that follow the same principle as the longest chain with stakes instead of computing power.

[DaveF]

The problem is that mining is so centralised and not transparent. About 50-60 miners control 51% of the hash power, we also don't have a dashaboard, a tool to check the status of the network, and we have to rely on the intensive work of researchers. This is a serious lack of transparency. The government does not want to destroy Bitcoin, it is enough to control it.

Not even close, just because you like spitting out numbers that mean nothing.
If you ever get off your chair and go to any of the large blockchain events you are going to meet a lot more then 50 to 60 people who control a few EH/s thought their companies.
Hell even here you can see the % of some of the mining in the US and that is spread among dozens and dozens of companies.

https://medium.com/foundry-digital/foundry-usa-pool-hashrate-by-state-f9dc92e7bc3b

Learn how things work before spouting off about them.

-Dave

[alfredaino]

The problem is that mining is so centralised and not transparent. About 50-60 miners control 51% of the hash power, we also don't have a dashaboard, a tool to check the status of the network, and we have to rely on the intensive work of researchers. This is a serious lack of transparency. The government does not want to destroy Bitcoin, it is enough to control it.

Not even close, just because you like spitting out numbers that mean nothing.
If you ever get off your chair and go to any of the large blockchain events you are going to meet a lot more then 50 to 60 people who control a few EH/s thought their companies.
Hell even here you can see the % of some of the mining in the US and that is spread among dozens and dozens of companies.

https://medium.com/foundry-digital/foundry-usa-pool-hashrate-by-state-f9dc92e7bc3b

Learn how things work before spouting off about them.

-Dave

Honestly, I trust two scientific papers more than opinions of a random user or data provided by those with vested interests. Landlord how is the wine? Excellent
If these papers are wrong, I would like to have proof and suggestions to correct it.
Assuming the data from the two research papers is valid, any reasonable person understands that there is a decentralisation and transparency problem at the heart of bitcoin. Then if we want to hide the reality to prevent it from losing value, fine, just say so.

[stompix]

This is a very good point and is no different from selfish mining, in which miners "hide" their generated blocks from the main blockchain and only require 28% of the hash power, according to this https://www.certik.com/resources/blog/7uiBC4AA6ex2MS9eEnkZKy-blockchain-fundamentals-key-consensus-algorithms.

Why do you change the actual interpretation of what was said there?

Selfish mining attacks start to become significantly probable when a node or a group of nodes control at least 28% of the network's computational power

It's not that an attacks requires only 28% it is is just that at that number it stops having so many zeros after the dot that it becomes a possibility.
Again missing from this is that while you could theoretically in secret mine  temporary a longer chain with each new block your chain would need to have your chances go down proportionally to the hashrate you hold. That's why the 6 blocks confirmation! (Which most don't care anymore at all)
And how is attack going to unfold, you're going to deposit and withdraw to Binance every hour while hoping in the same hour you're going to finally manage to get the attack ready? And you're going to do this every hour for 20 weeks till you finally get it?
Ghash doublespending happened on unconfirmed transactions, nobody is doing large enough business on those anymore.

[Cricktor]

Do you have any good reason why you post five consecutive posts in a row within about an hour time only? You're quite obviously violating rule 32 of Unofficial list of (official) Bitcointalk.org rules, guidelines, FAQ!

32. Posting multiple posts in a row (excluding bumps and reserved posts by the thread starter) is not allowed.

I see your intention to address and reply to multiple statements from different posters, but your execution can lead to your posts being deleted if reported. Or was your intention to boost your number of posts and activity?

It's no rocket science to insert quotes of different posters into one reply, at least when you reply from a desktop browser (mobile browsers can be forced to operate in desktop mode).

[mullick]

And at current hashrate we need to stop mining after a block for one and a half day writing for that pool to do two blocks.  

Slush was obviously just an example. A sign im behind the times perhaps, But irrelevant

The moment farms keep mining blocks that are not broadcasted not validated you will have red light flashing everywhere!

Sure there are miners out there who actually monitor what their miners are doing and would notice it moving on to new blocks but 99.99% wont and the ones that do will take time to get their word out. Then those people to move their hashrate. You only need 4 blocks with most exchanges.

That brings up another good point. Which large scale miners actually have monitoring in place for this? I doubt its standard across the industry. I know for a fact it wasn't when I was more involved and mining was even further centralized to a few pools.

This is all hypothetical of course as the risk of two or more major pools getting pwned and then the pwner deciding to carry out this specific attack are very minimal. I dont want people thinking I lose sleep over this, its certainly not a major concern now but if mining further centralizes into a handful of pools then the threat grows.

[ranochigo]

Since 50-60 miners control 51% of the computing power and since it is not possible to know who they are, one must trust that they are not either some private company or some government. The principles of decentralisation transparency of the whitepaper fail.

I'm not disputing that possibility. However, the so called transparency that you have mentioned in the whitepaper doesn't support your point. You can see everything is on the blockchain, but you cannot see which entity owns how many Bitcoins. Same principle applies to mining, which isn't highlighted in the whitepaper.

I find the entire discussion to be centered around hypothetical scenarios, which is rather unfortunate. I would expect more concrete points to support arguments rather than have the points revolving around the same few hypothetical scenarios.