Deepbit Approaching 50% Once Again

[gene]

I always find these threads amusing, especially from the 'free market' types. Unregulated markets naturally tend towards monopolies. At the end we will wind up with a single large pool and perhaps a few other minor ones that people are in for ideological reasons. At some point a less than ethical pool operator will appear and he will figure out that it is in his best interest to take out the other pools by any means available to him. As long as he kept his mouth shut it would be impossible for anyone else to know he was instigating trouble with the other pools. For a recent example, if btcex had not said anything, nobody would have known he was ddosing MtGox.

As the difficulty rate goes ever higher, you will see miners join toward the largest pools. After all, would you rather mine in a pool that finds blocks in hours or one that takes days or weeks to find one? There will come a point at which 100-300 Ghash/s pools just don't cut it anymore. These pools will in turn either dissolve or get absorbed by other, larger pools, thus increasing the larger pools' hashing power, and making it difficult for smaller pools to find blocks...all in a vicious circle.

There are reasons that every industrialized country in the world has anti-trust laws. Because they have already learned the hard way what happens when you let the market 'self regulate' itself. You get things like Standard Oil. If the US and EU did not have anti-trust laws, everybody reading my words would be doing so with IE on a Windows based computer.

If markets don't tend toward monopolies...then why has nobody made a successful competitor to MtGox?

This ridiculous crap again? Please go shit in someone else's thread.

You are a fool, and your post is inappropriate. Lupus_Yonderboy is absolutely correct, and he is outlining the single biggest threat to bitcoin. He is also making his point in the correct thread.

See this thread for a possible solution:
http://forum.bitcoin.org/index.php?topic=9137

This urgent problem demands an immediate solution.

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[gene]

Most of you are totally missing the point. It is completely irrelevant if tycho can be trusted or not.
Simply the fact that a pool > 50% might exist is a huge security issue for the network.

Somebody has just (and I am saying "just" because no matter how much you pay attention to potential security risks, there is always a chance you get hacked, e.g. by undisclosed exploits) to take over the servers and then can be harmful to the network.

Another potential issue: Somebody with huge hashing power and the right knowledge could take down all major pools at once (e.g. via DDoS, there are kinds of ddos you can hardly mitigate, so this IS doable) which then would only leave the solo miners, according to the chart at about 400Ghash/s.
Then somebody could crank up his own mining equipment (at maybe 450ghash) and would have over 50% of hashing power under control.

Precisely. This is so obvious that it boggles the mind that so many people here keep missing the point.

decentralized mining may offer a solution:
http://forum.bitcoin.org/index.php?topic=9137

[wol-va-rine]

Hey guys, just wanted to point out some (somewhat unsettling) stats again:
Deepbit is approaching 50% of the hashing power once again 

While I dont have any beef with the operator of Deepbit ([Tycho] I believe), I have a beef with the security of our beloved Bitcoin.
As most of us know, the blockchain is secure as long as nobody controls more than or equal to 50% of the total hashing power of the network.
Deepbit seems to be ~40 percent, and has been climbing due to the massive influx of new miners and hardware. I'm not OK with that (Nothing personal, Tycho).

I suggest that those on Deepbit should switch to other, smaller pools, or some of the more powerful miners at least divert some of their resources to other pools to maintain a good hashing distribution equilibrium.
<advertisement>Furthermore, I would like to put in a plug forhttp://www.Bitcoins.lc; they are a 0% fee pool supporting long polling. Check em out. </advertisement>

Here is a chart of the current distribution:
http://chart.googleapis.com/chart?chs=350x200&chd=t:39.50,2.84,16.04,0.62,12.02,18.54,2.26,7.15,1.02&cht=p&chf=bg,s,00000000&chl=deepbit|BitcoinPool|slush|bitcoins.lc|btcguild|other|Eligius|btcmine|swepool

Thanks for reading and supporting the security of Bitcoin

during the time Deepbit was down a week or so ago I went to BTC Guild and Slush's pool IIRC, and mined there while Deepbit was down, what a fuckmess, for the hours (probably a couple hours on each pool) I put in I got zero payout, ZERO, fuck that shit, my payout balance goes up every hour on Deepbit, so if Deepbit is where I can get "paid" (so to speak) that's where I'll mine...   

[cosix]

Wow, so a 24 hour loan is worth that much to you? I thought people were smarter than that

[wol-va-rine]

Wow, so a 24 hour loan is worth that much to you? I thought people were smarter than that

worth what...? the 7% fee...? yep, I'll still get more paying a 7% fee on a larger amount than I will paying a 2.5% fee on a much smaller amount, or maybe I just don't get it...? that is just my assumption, care to explain...? I'm pretty new to this, but the bottom line numbers seem to speak for themselves imo...

[kiwiasian]

So what? What actually happens if deepbit controls half of the hashing power? They get the most BTC? Oooooh, big deal, mine on deepbit then.

Geez, people.

[inh]

So what? What actually happens if deepbit controls half of the hashing power? They get the most BTC? Oooooh, big deal, mine on deepbit then.

Geez, people.

Go educate yourself

https://en.bitcoin.it/wiki/Main_Page

[Lupus_Yonderboy]

On the latest charts it shows the "other" section at 6.57%. This means that 93.46% of the network hashrate is currently in pools. Really, you shouldn't worry about the double spend, etc attacks. Just think of the personal economic gain of having 2.7% of the entire network hashrate for your own. Meaning if the pools concentrated down to a monopoly and one pool had 90% of the network hashrate, with a 3% fee (.9*.03=.027). Multiply that by the average number of bitcoins mined per day (7200, I believe?) and at the current exchange rate of ~$18US...(.027*7200*18)=~$3500US PER DAY. Or roughly $100k per month, and that is if the price stays constant (and it won't).

People get killed over far less money. Don't be surprised when some ethically challenged indviduals make this a serious business. The world is not as pure as some would apparently like it to be. It will be in someone's best financial interest to eliminate their competition either by buying them out or other, more persuasive measures. Not neccessarily lethal, but there are many, many things that can be done to take someone off the net for months or years, all relatively cheap.

I'm sorry that the way things work in the real world, with real people, does not meet the idealogical expectations of many on this board. The pools will consolidate over time, and a savvy operator will own multiple pools, so as to deflect suspicion and/or >50% fears. Miners will tend to go with pools that have less downtime and bigger payouts (whether real or perceived.) It is a natural progression of the market, and eventually where things will wind up.

Please note that I am in no way accusing anybody of any sort of malfeasance, but there is a lot of incentive for it out there, and that incentive will only increase as the value of bitcoins does. Even if there is no wrongdoing though, the network hash rate will still be controlled by a very small number of people.

Don't hate the players, hate the game. This is what a free, unregulated market looks like in the real world. Capitalism at its finest.

[gene]

On the latest charts it shows the "other" section at 6.57%. This means that 93.46% of the network hashrate is currently in pools. Really, you shouldn't worry about the double spend, etc attacks. Just think of the personal economic gain of having 2.7% of the entire network hashrate for your own. Meaning if the pools concentrated down to a monopoly and one pool had 90% of the network hashrate, with a 3% fee (.9*.03=.027). Multiply that by the average number of bitcoins mined per day (7200, I believe?) and at the current exchange rate of ~$18US...(.027*7200*18)=~$3500US PER DAY. Or roughly $100k per month, and that is if the price stays constant (and it won't).

People get killed over far less money. Don't be surprised when some ethically challenged indviduals make this a serious business. The world is not as pure as some would apparently like it to be. It will be in someone's best financial interest to eliminate their competition either by buying them out or other, more persuasive measures. Not neccessarily lethal, but there are many, many things that can be done to take someone off the net for months or years, all relatively cheap.

I'm sorry that the way things work in the real world, with real people, does not meet the idealogical expectations of many on this board. The pools will consolidate over time, and a savvy operator will own multiple pools, so as to deflect suspicion and/or >50% fears. Miners will tend to go with pools that have less downtime and bigger payouts (whether real or perceived.) It is a natural progression of the market, and eventually where things will wind up.

Please note that I am in no way accusing anybody of any sort of malfeasance, but there is a lot of incentive for it out there, and that incentive will only increase as the value of bitcoins does. Even if there is no wrongdoing though, the network hash rate will still be controlled by a very small number of people.

Don't hate the players, hate the game. This is what a free, unregulated market looks like in the real world. Capitalism at its finest.

Yeah, you're right on that. We require a technical solution to the problem, just like mathematics solved trust and inflation. I hope the proposed new pool system goes on before anything of that kind happens.

Which is why we need more threads like this one:
http://forum.bitcoin.org/index.php?topic=9137

[psychocoder]

@all power miner

Please switch to a smaller pool, if deepbit is to huge the price of bitcoins fall and bitcoins won't get accepted as normal currency.

[Coma]

offtopic: We should have to get a license to mine, and another one to post.

I think the regular person approaching bitcoin can be prone to anxiety. I know I am at least, and if I need to wait to get my BTC shares, I have the feeling that I'm makiing less BTC. I guess we should simply do the math and get some experience. But deepbit is recommended to newbies as a good starter pool. So it makes sense that if the community grows, deepbit grows also.

[bcpokey]

offtopic: We should have to get a license to mine, and another one to post.

I think the regular person approaching bitcoin can be prone to anxiety. I know I am at least, and if I need to wait to get my BTC shares, I have the feeling that I'm makiing less BTC. I guess we should simply do the math and get some experience. But deepbit is recommended to newbies as a good starter pool. So it makes sense that if the community grows, deepbit grows also.

Are people using the pay per share option? That's the only place that deepbit excels over other pools. And it's a terrible option unless you're a very intermittent miner. BTW PPS is not 7%, it was only 7% during the "apology period". It is normally 10%.

[NghtRppr]

I always find these threads amusing, especially from the 'free market' types. Unregulated markets naturally tend towards monopolies.

In a free market, even with monopolies there is still the threat of competition. Let's say that Nike has a monopoly in shoes. As long as everyone is getting what they want at a reasonable price, who cares? The reason why, even with a monopoly, Nike isn't going to start charging $1,000 for a pair of low quality shoes is that they know it would entice competition. They want to keep their monopoly so they refrain from doing that because, at a reasonable price and reasonable quality, there's no incentive for competition. Hence, the mere fact that someone could enter the shoe market will prevent Nike from getting uppity.

Monopolies aren't bad unless they're enforced involuntarily which requires government action. Voluntary monopolies aren't a problem.

[sirky]

I always find these threads amusing, especially from the 'free market' types. Unregulated markets naturally tend towards monopolies.

In a free market, even with monopolies there is still the threat of competition. Let's say that NIKE has a monopoly in shoes. As long as everyone is getting what they want at a reasonable price, who cares? The reason why, even with a monopoly, NIKE isn't going to start charging $1,000 for a pair of low quality shoes is that they know it would entice competition. They want to keep their monopoly so they refrain from doing that because, at a reasonable price and reasonable quality, there's no incentive for competition. Hence, the mere fact that someone could enter the shoe market will prevent NIKE from getting uppity.

Monopolies aren't bad unless they're enforced involuntarily which requires government action. Voluntary monopolies aren't a problem.

Unless it was really hard/expensive to begin making shoes, there was a very steep learning curve, or some other similar reason that someone could not easily enter the shoe market. Then Nike would have a lot more leeway in charging prices.

[EpicBacon]

They're getting a bit too close......

[NghtRppr]

Unless it was really hard/expensive to begin making shoes, there was a very steep learning curve, or some other similar reason that someone could not easily enter the shoe market. Then Nike would have a lot more leeway in charging prices.

If it's difficult to enter the market then Nike had the same difficulty entering the market. Turnabout is fair play.

[bcpokey]

I always find these threads amusing, especially from the 'free market' types. Unregulated markets naturally tend towards monopolies.

In a free market, even with monopolies there is still the threat of competition. Let's say that NIKE has a monopoly in shoes. As long as everyone is getting what they want at a reasonable price, who cares? The reason why, even with a monopoly, NIKE isn't going to start charging $1,000 for a pair of low quality shoes is that they know it would entice competition. They want to keep their monopoly so they refrain from doing that because, at a reasonable price and reasonable quality, there's no incentive for competition. Hence, the mere fact that someone could enter the shoe market will prevent NIKE from getting uppity.

Monopolies aren't bad unless they're enforced involuntarily which requires government action. Voluntary monopolies aren't a problem.

Uhm, what evidence do you have of this? I mean yes, I understand the theory, and have heard it about a billion times, but what *evidence* is there.

The person you quoted gave a couple of good examples of non-governmentally enforced monopolies. Standard Oil. US Steel. Neither of these were monopolies enforced by governmental action. Both caused terrible drains on everyone, especially the workers (I doubt the people lining the gates begging for a days wages would have said that everyone was happy) who were essentially forced into servitude by the situation. But this is getting offtopic, I'm still looking for evidence.

Barrier of entry to market is not as trivial as you make it sound. Yes it may sound "fair" that it's difficult to enter a profitable market for late comers, but it doesn't help your point that monopolies are balanced by potential rivals if the barrier to entry is so high that competition is almost impossible.

EDIT: As a potential counter example, look at microsoft. An inferior product at hugely inflated prices from a terribly inefficient company that is essentially a monopoly due to legacy support requirements and an almost impossibly high barrier to entry at market.

[tripper22]

All that matters is that it's dangerous to Bitcoin. Regardless of how the attack happens. Once the confidence in a currency is lost, it's gone for good. If you believe in Bitcoin you should be doing what you can to protect it. Even if it means more variance. I'm moving to Eligius right now.

[NghtRppr]

Uhm, what evidence do you have of this? I mean yes, I understand the theory, and have heard it about a billion times, but what *evidence* is there.

The person you quoted gave a couple of good examples of non-governmentally enforced monopolies. Standard Oil. US Steel. Neither of these were monopolies enforced by governmental action. Both caused terrible drains on everyone, especially the workers (I doubt the people lining the gates begging for a days wages would have said that everyone was happy) who were essentially forced into servitude by the situation. But this is getting offtopic, I'm still looking for evidence.

Barrier of entry to market is not as trivial as you make it sound. Yes it may sound "fair" that it's difficult to enter a profitable market for late comers, but it doesn't help your point that monopolies are balanced by potential rivals if the barrier to entry is so high that competition is almost impossible.

Look, if I have a business harvesting moon rocks and you complain that I'm charging too high of a price or that it creates a terrible drain on the workers then start your own company. If you can't find investors willing to risk their money then what right do you have to say that the prices are too high? All prices are too high since consumers would like to get everything for free but when dealing with economics we have to evaluate actions, not words.

Let's take oil for example. It's rare and hard to acquire. Therefore, the prices they charge reflect this. If the price of oil is too high then people will switch to other sources of energy. If they are still buying it, it doesn't matter if they are grumbling about the price, clearly the price isn't too high, otherwise, it wouldn't be selling. The same applies to any other natural monopoly. Free market monopolies aren't "bad" as long as you get rid of the idea that you should be able to get everything for free. The prices will always approach what it's actually worth.

As a potential counter example, look at microsoft. An inferior product at hugely inflated prices from a terribly inefficient company that is essentially a monopoly due to legacy support requirements and an almost impossibly high barrier to entry at market.

That's just opinion, nothing more. Perhaps the software itself is inferior but you can't consider it in a vacuum. You need to consider human capital, how many people understand it, use it, can program with it, what kind of support there is for it, etc. If Linux was so wonderful, it would have taken over by now. Counterexample, Mozilla Firefox. Internet Explorer had a monopoly but now it's losing market share daily. Firefox is king these days.

[bcpokey]

Uhm, what evidence do you have of this? I mean yes, I understand the theory, and have heard it about a billion times, but what *evidence* is there.

The person you quoted gave a couple of good examples of non-governmentally enforced monopolies. Standard Oil. US Steel. Neither of these were monopolies enforced by governmental action. Both caused terrible drains on everyone, especially the workers (I doubt the people lining the gates begging for a days wages would have said that everyone was happy) who were essentially forced into servitude by the situation. But this is getting offtopic, I'm still looking for evidence.

Barrier of entry to market is not as trivial as you make it sound. Yes it may sound "fair" that it's difficult to enter a profitable market for late comers, but it doesn't help your point that monopolies are balanced by potential rivals if the barrier to entry is so high that competition is almost impossible.

Look, if I have a business harvesting moon rocks and you complain that I'm charging too high of a price or that it creates a terrible drain on the workers then start your own company. If you can't find investors willing to risk their money then what right do you have to say that the prices are too high? All prices are too high since consumers would like to get everything for free but when dealing with economics we have to evaluate actions, not words.

Let's take oil for example. It's rare and hard to acquire. Therefore, the prices they charge reflect this. If the price of oil is too high then people will switch to other sources of energy. If they are still buying it, it doesn't matter if they are grumbling about the price, clearly the price isn't too high, otherwise, it wouldn't be selling. The same applies to any other natural monopoly. Free market monopolies aren't "bad" as long as you get rid of the idea that you should be able to get everything for free. The prices will always approach what it's actually worth.

As a potential counter example, look at microsoft. An inferior product at hugely inflated prices from a terribly inefficient company that is essentially a monopoly due to legacy support requirements and an almost impossibly high barrier to entry at market.

That's just opinion, nothing more. Perhaps the software itself is inferior but you can't consider it in a vacuum. You need to consider human capital, how many people understand it, use it, can program with it, what kind of support there is for it, etc. If Linux was so wonderful, it would have taken over by now. Counterexample, Mozilla Firefox. Internet Explorer had a monopoly but now it's losing market share daily. Firefox is king these days.

None of your responses represent an answer to my one question asked of you.

What evidence do you present that the monopolies formed under a free market are balanced by an invisible potential competitor? Internet Explorer is a terrible example, as it was sued under Anti-Trust laws and the evil government forced Microsoft to change its practices to create more "fair" competition.


I had a feeling that by opening the conversation up with any side commentary that I wouldn't get an answer so I will not make further response. This is not to reject your points or brush them aside, but I do want an answer.

There is ample evidence of monopolies acting unfairly when their monopolistic power grants them that ability (some has been given, so let's not argue over this part). Where is your evidence in the real world (not simply theory) of monopolistic companies held in abayance not by government or anti-trust law, but by the mechanics of the economic principles you espouse? I'm honestly curious.