Mining Centralization Concerns

[RealBitcoin]

I am really concerned about mining centralization, and possible influence of politics over miners, especially shady bribery deals that might go on with big miners or mining pool owners (like the Bitcoin Classic shady stuff practices or this one MIT Totalitarian Takeover)

Problems:

• Most miners, mining pools are from 1 political zone: China, which exposes the bitcoin network to political centralization risks
• The upcoming halving (until the price doesnt double) will temporarly or even longer, knock out many smaller miners who already were in losses, and can centralize bitcoin even further amongst mining pools. We must be careful in those times, because bitcoin is the most vulnerable in the 1 month after the halving. We must watch out for totalitarian takeovers of bitcoin in this timeframe
• Miner bribery becomes more likely as the profits of big miners shrink, and if they are centralized, the systemic risk becomes larger
• If the top 4 mining pools do a shady backdoor meeting, and allow by consensus a malicious or totalitarian BIP to be passed, then we are screwed!

Solutions:

• If the bitcoin price increases, more miners will join us due to greed and existing smaller miners will have enough profits to uppgrade, thus mining decentralizes
• Current mining equipment has reached the cutting edge of technology, the 16 nanometer chips are currently the best, and mining efficiency increase will probably slow down to a logarithmic curve now. This means that big miners wont have huge advantage anymore over little miners, by uppgrading to new stuff. Also people who buy the latest mining equipment, will suffer less deflation, and if a newer one comes out they can sell them at a better price and not lose that much money. This will keep more money in pockets of smaller miners, and they can uppgrade now more efficiently with less losses. Also miners that buy mining equipment now, can use that equipment longer before the difficulty increases thus making faster ROI and more profits so they can expand faster.
• The upcoming halving should double the price, but it can increase it even more in the longer term, making it easier for miners to mine, and decentralize it
• We must have a very good alert system and comunication system in case of a malicious hardfork happens. Especially a pre-planned one, that was due to bribery. Totalitarian takeovers of bitcoin should be fight against by the entire community!
• We must incentivize bitcoin mining again, and raise awareness to it, especially in countries where the electricity is cheap by default. People who live in cheap electricity countries must participate in bitcoin mining for the sake of bitcoin's future!
• Anyone who cares about bitcoin, should support it now, and should spread the word about it! We should stop hoping for bitcoin to succeed and start working on bitcoin's success!
• 21 Inc mining chips to be integrated in every electronic gadget, so that the masses can mine bitcoin in idle mode, decentralizing mining even more!
  https://www.cryptocoinsnews.com/breaking-21-inc-releases-new-bitcoin-mining-chip-smartphones/
• Bitcoin mining chips integrated in heating systems. That way the extra heat will warm up the house in cold climates. It can add tons of mining power to bitcoin once it becomes trendy in cold areas.

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[matt4054]

Unfortunately most of your solutions appear like wishful thinking to me

[pedrog]

Unfortunately most of your solutions appear like wishful thinking to me

Not just the solutions but also the problems...

[RealBitcoin]

Unfortunately most of your solutions appear like wishful thinking to me

Not just the solutions but also the problems...

Elaborate that? I think my concerns are pretty well founded and not just fantasies.

These bad things can happen anytime like a black swan even, if the community is not prepared for them, or doest nothing to prevent them before they could happen.

[gentlemand]

Ever spiraling difficulty is surely the major factor in centralisation. The makers and operators of the best machines are going to hoard them. The richer they get the further ahead they pull. Nothing's going to change now I don't think. Satoshi missed a trick there.

[franky1]

the only pools that will make a profit are those that have manufacturing linked to their business.

no matter how much you try to tell people in the west to start mining. they are going to be buying the rigs from the east at a huge markup. so the west will NEVER be as competitive as the east.

its already happening. for every rig sold for $1000. has an actual cost price of under $200. so for every rig someone in the west buys, they are literally giving 4 other rigs to the competition in the east.(and they 'thank you long time' for those free-bies that allow 400% competition advantage)

there is no way to compete unless you are part of the manufacturing of the rigs.

the solution. expand the manufacturing and get more rig manufacturers on the market. which will trickle down as more choice, and more options and also a price war on the rigs. which will result in cheaper rigs to allow for more chance of competition.

EG if there are suddenly 10 manufacturers.. you will see the smart ones drop their price to $400 so that they still get a free rig, but also are still beating the competitors

but if there remains only 2 main mining rig manufacturers, they will continue to overprice the competition and cause less distribution amungst the pools. basically they see no point in dropping the retail price as it hurts them while there remains only a couple big players. after all if your the king and queen why would you lower your price point to let the court-jester have a chance..

but if there are 10 main players. then the smart ones will lower prices to remain on top and grab the business to suffocate the rest

[bitbite111]

A solution is to move to a proof of stake coin. But nobody wants to hear that.

[RealBitcoin]

the solution. expand the manufacturing and get more rig manufacturers on the market. which will trickle down as more choice, and more options and also a price war on the rigs. which will result in cheaper rigs to allow for more chance of competition.

Where is silicon valley folks? All those manufacturing plants...

Dont let them go to waste, they should start producing cheap mining equipment for americans and europeans.

[Kakmakr]

the solution. expand the manufacturing and get more rig manufacturers on the market. which will trickle down as more choice, and more options and also a price war on the rigs. which will result in cheaper rigs to allow for more chance of competition.

Where is silicon valley folks? All those manufacturing plants...

Dont let them go to waste, they should start producing cheap mining equipment for americans and europeans.

The Chinese still have the manufacturing edge over the west with the 16 nanometer chips. It will take time for Silicon valley to pick up the slack and even if they do this, the Chinese will just find ways to do it cheaper. They have much cheaper labor and they are more disciplined.

The technology will stagnate for a while, until something new pops up and then we will rinse and repeat. The only way for the West to dominate, will be to subsidize the electricity to boost investment into Bitcoin mining and this must be cheaper than the Chinese, which will be very difficult. 

[RealBitcoin]

The Chinese still have the manufacturing edge over the west with the 16 nanometer chips. It will take time for Silicon valley to pick up the slack and even if they do this, the Chinese will just find ways to do it cheaper. They have much cheaper labor and they are more disciplined.

The technology will stagnate for a while, until something new pops up and then we will rinse and repeat. The only way for the West to dominate, will be to subsidize the electricity to boost investment into Bitcoin mining and this must be cheaper than the Chinese, which will be very difficult. 

Why dont they buy the blueprints?

I guess it would be cheaper to buy the blueprints from them and design an equally powerful or even cheaper mining equipment in silicon valley.

Technology is already stagnating, so acquiring the blueprints now is the best investment now for the manufacturers.

[franky1]

Why dont they buy the blueprints?

I guess it would be cheaper to buy the blueprints from them and design an equally powerful or even cheaper mining equipment in silicon valley.

Technology is already stagnating, so acquiring the blueprints now is the best investment now for the manufacturers.

1. even knowing how to make it does not suddenly or magically become cheaper simply because silicon valley is involved.
2. buying blueprints is meaningless. once you spent millions of dollars and months of negotiations the blue prints are already out of date because a new design has already started production by the competitor.
3. no matter where you get the talent. (bitmain already has engineers from san fransisco) the physical manufacturing wont be cheaper done in USA
4. it does not matter where in the world the headquarters is. the manufacturing has to be done somewhere with low labour cost, low facility cost

the solution is to follow antpool(bitmains) business plan.

have talent from san fran. have manufacturing in [cheap location], run the rigs in 1 hour delivery distance of manufacturing factory but have the main pool server in any country you please.

i wont suggest african, indian or any of the 'stan' countries based on the heat(adding costs to keep rigs cool).
looking at a non middle east country to set up. i would say the Ukraine or russia has potential. compared to america or the UK, based on labour and facility costs.
ukraine has cheaper labour($0.30c /h) and also cheap electricity($0.02c-$0.06c /kwh). aswell as an acceptable climate for electronics.

though that was just my 2 minute browsing of stats, im sure there is another eastern europe/north europe country that can beat that

[RealBitcoin]

1. even knowing how to make it does not suddenly or magically become cheaper simply because silicon valley is involved.
2. buying blueprints is meaningless. once you spent millions of dollars and months of negotiations the blue prints are already out of date because a new design has already started production by the competitor.
3. no matter where you get the talent. (bitmain already has engineers from san fransisco) the physical manufacturing wont be cheaper done in USA
4. it does not matter where in the world the headquarters is. the manufacturing has to be done somewhere with low labour cost, low facility cost

the solution is to follow antpool(bitmains) business plan.

have talent from san fran. have manufacturing in [cheap location], run the rigs in 1 hour delivery distance of manufacturing factory but have the main pool server in any country you please.

i wont suggest african, indian or any of the 'stan' countries based on the heat(adding costs to keep rigs cool).
looking at a non middle east country to set up. i would say the Ukraine or russia has potential. compared to america or the UK, based on labour and facility costs.
ukraine has cheaper labour($0.30c /h) and also cheap electricity($0.02c-$0.06c /kwh). aswell as an acceptable climate for electronics.

though that was just my 2 minute browsing of stats, im sure there is another eastern europe/north europe country that can beat that

Yea but I`m talking about comercially available mining equipment.

Its useless if they develop the miners and only use it themselves, or sell it for a 8x profit.

That wont help bitcoin become decentralized.

So we need more producers to flood the market to make the cost of those equipments ultra cheap.

[franky1]

1. even knowing how to make it does not suddenly or magically become cheaper simply because silicon valley is involved.
2. buying blueprints is meaningless. once you spent millions of dollars and months of negotiations the blue prints are already out of date because a new design has already started production by the competitor.
3. no matter where you get the talent. (bitmain already has engineers from san fransisco) the physical manufacturing wont be cheaper done in USA
4. it does not matter where in the world the headquarters is. the manufacturing has to be done somewhere with low labour cost, low facility cost

the solution is to follow antpool(bitmains) business plan.

have talent from san fran. have manufacturing in [cheap location], run the rigs in 1 hour delivery distance of manufacturing factory but have the main pool server in any country you please.

i wont suggest african, indian or any of the 'stan' countries based on the heat(adding costs to keep rigs cool).
looking at a non middle east country to set up. i would say the Ukraine or russia has potential. compared to america or the UK, based on labour and facility costs.
ukraine has cheaper labour($0.30c /h) and also cheap electricity($0.02c-$0.06c /kwh). aswell as an acceptable climate for electronics.

though that was just my 2 minute browsing of stats, im sure there is another eastern europe/north europe country that can beat that

Yea but I`m talking about comercially available mining equipment.

Its useless if they develop the miners and only use it themselves, or sell it for a 8x profit.

That wont help bitcoin become decentralized.

So we need more producers to flood the market to make the cost of those equipments ultra cheap.

like i said.. if someone was to set up another manufacturing company in a cheap eastern euro country (to compete) they can sell rigs cheaper. and start a price war to get cheaper rigs from both china and europe.

but here is the thing. no matter what delusions that a westerner has, they will never be able to buy a rig and run it in their basement and be competitive vs the east.
manufacturers will always be far ahead of the game in many ways. so the concentration should be on an increase of manufacturers, which results in a ripple effect to make consumers slightly better off (but never better off then the manufacturing company)

even if a manufacturer was to sell a rig AT COST. (eg $200)
the delivery to usa would be $30 (15% less competitive before it even arrives)
electricity is double so profit vs cost takes another cut (china has 70% profitability. 30% cost, meaning usa is 40% profit 60% cost)

and then there is the delivery time itself, usually 2 weeks.

so imagine 1 rig can make 0.1btc a week.
week one(china): 0.1btc(0.07btc profit)
week one(USA): 0btc
week two(china): 0.1btc(0.07btc profit)
week two(USA): 0btc
week three(china): 0.09btc(0.063btc profit) - (10% drop of reward due to difficulty jump)
week three(USA): 0.09btc(0.036btc profit)
week four(china): 0.09btc(0.063btc profit)
week four(USA): 0.09btc(0.036btc profit)

so in just 1 month even selling rigs at cost price. china would earn 0.266btc
so in just 1 month even selling rigs at cost price. USA would earn 0.076btc

meaning china has already got over $100 for their $200 rig. usa only has $30 for their $230 purchase

[RealBitcoin]

like i said.. if someone was to set up another manufacturing company in a cheap eastern euro country (to compete) they can sell rigs cheaper. and start a price war to get cheaper rigs from both china and europe.

1) People should setup their own solar power farms
2) Perhaps they should manufacture the parts and assemble it at the destination and then the manufacturer wont have a huge profit margin
3) Yes the more manufacturers the bigger supply and the lower price

4) What about the 21 INC mining chips, they said that it can be integrated in any appliance or electronic item in the future?
https://www.cryptocoinsnews.com/breaking-21-inc-releases-new-bitcoin-mining-chip-smartphones/

For example Iphone 8 to mine bitcoins directly from the phone.

[franky1]

like i said.. if someone was to set up another manufacturing company in a cheap eastern euro country (to compete) they can sell rigs cheaper. and start a price war to get cheaper rigs from both china and europe.

1) People should setup their own solar power farms
2) Perhaps they should manufacture the parts and assemble it at the destination and then the manufacturer wont have a huge profit margin
3) Yes the more manufacturers the bigger supply and the lower price

4) What about the 21 INC mining chips, they said that it can be integrated in any appliance or electronic item in the future?

For example Iphone 8 will mine bitcoins directly from the phone.

1. solar power in USA (buying equipment, install etc) is not cheaper.. people only break even after several years. by that time they need to repair and maintain the panels.

2. having consumers assemble it in their basement wont work.. (i presume thats what u meant). if you mean running the rigs at or near the manufacturing facility.. then thats already happening and why manufacturers line bitmain are so profitable.

3. obviously.

[spartacusrex]

Trying to have this very discussion in the Technical forum..

https://bitcointalk.org/index.php?topic=1430548.0

I think that trying to compete as a standard miner, with the current miners, isn't going to work..

An efficient bitcoin mining chip, installed in every Android phone, coupled with seamless pool integration so that it all 'just works', may be the only way to overcome the current situation..

A billion mining chips controlled by the users vs the current miners would be a good match up.

.. we'd need a billion users though.. 

Or would a million be enough ? Not up on chip speeds, can anyone enlighten ?

[franky1]

Trying to have this very discussion in the Technical forum..

https://bitcointalk.org/index.php?topic=1430548.0

I think that trying to compete as a standard miner, with the current miners, isn't going to work..

An efficient bitcoin mining chip, installed in every Android phone, coupled with seamless pool integration so that it all 'just works', may be the only way to overcome the current situation..

A billion mining chips controlled by the users vs the current miners would be a good match up.

.. we'd need a billion users though..  

Or would a million be enough ? Not up on chip speeds, can anyone enlighten ?

replying to you and continuing point 4 of 'realbitcoins' post

4. the heat coming off a chip will burn out the batter of a iphone/android.. if not ur hand first. putting chips into any piece of home appliance is meaningless.. if there are only 20 pools. it does not matter of there are a million users.. because a manufacturer will probably have more hash power alone compared to the 50k people per pool

we are no longer in the solo mining era where competition is measured by individual users/equipment. its done by the combined power around the world linked to a particular pool server. (emphasis on the pool server being the main thing)

even if we had Apple pool where all apple phones connect to an apple pool. we had a samsung pool where all smart Tv's connected to a samsung pool. and 20 other brand pools.. the manufacturer of the chip itself will make rigs that are 100x more powerful then a iphone/40"tv while being at the same price point of a tv/phone.
basically if an home appliance costs $200 with 1x 40ghash chip inside. someone else would spend $200 to get a rig with 4thash of power.

its also worth noting that asic chips have NO HARDDRIVE. they do not store the blockchain. they just connect to a server and send hashes.. so it doesnt really matter if samsung sell 1 million TV's across america with asic chips inside.. a asic manufacturer can sell 10,000 asics. and out compete samsung.

mining rig distribution is meaningless if they are all connecting to just a few pool servers.

[RealBitcoin]

1. solar power in USA (buying equipment, install etc) is not cheaper.. people only break even after several years. by that time they need to repair and maintain the panels.

2. having consumers assemble it in their basement wont work.. (i presume thats what u meant). if you mean running the rigs at or near the manufacturing facility.. then thats already happening and why manufacturers line bitmain are so profitable.

3. obviously.

4. the heat coming off a chip will burn out the batter of a iphone.. if not ur hand. putting chips into any piece of home appliance is meaningless.. if there are only 20 pools. it does not matter of there are a million users.. because a manufacturer will probably have more hash power alone compared to the 50k people per pool

1) Damn those pesky regulations and sales tax or whatnot taxes are probably in the way... Anyway new technology will come out and will make everything more efficient.

2) Not necessarly that way, but what I mean is that the manufacturer to sell the parts to assembly plants. The manufactoring factories have always the lowers profit margin so, an extra middleman here is actually beneficial. Then if you worry about assembly plants being greedy, then just have many of them. It's easier to assemble it from parts than to make the parts, and it's the assembler that would be the greedy one. So just have more assemblers than manufacturers and the price should come down. An extra middleman in this case is probably good.

Otherwise the regulations and taxes are the biggest issue. International manufacturing and export has tens of thousands of regulations that make those items expensive...

4) Doesnt have to run at full capacity. Even if they just mine a few satoshis/day. It's idle and i bet that many people would use it, just like many people use PTC sites for 1 cent payments... People love to work for nothing, because they are addicted to the new money, not the size of it.
So an automatic bitcoin generator that would generate them 1 satoshi/minute would make them addicted to it

[franky1]

2) Not necessarly that way, but what I mean is that the manufacturer to sell the parts to assembly plants. The manufactoring factories have always the lowers profit margin so, an extra middleman here is actually beneficial. Then if you worry about assembly plants being greedy, then just have many of them. It's easier to assemble it from parts than to make the parts, and it's the assembler that would be the greedy one. So just have more assemblers than manufacturers and the price should come down. An extra middleman in this case is probably good.

that worked out so well for Butterfly labs.. 2 years on and they couldnt even release an end product.

its actually cheaper to have the manufacturing and mining facility right next door to each other (1 hour delivery at most). instead of making the chips in china/europe shipping them to america and then have someone at $9 an hour making the rigs and then another group of guys at $9 an hour supervising the mining(fully produced running asics) facility.
sorry but america wont EVER be a good production centre for asics

4) Doesnt have to run at full capacity. Even if they just mine a few satoshis/day. It's idle and i bet that many people would use it, just like many people use PTC sites for 1 cent payments... People love to work for nothing, because they are addicted to the new money, not the size of it.
So an automatic bitcoin generator that would generate them 1 satoshi/minute would make them addicted to it

ok lets imagine we had 1million phones with a chip in them. 1 million smart Tv's,, blah blah blah.. 20 home appliences with 20 pools.

thats 20 million devices. or 720sat a day if evenly rewarded.

knowing that the 20 pools are evenly distributed as 1million x 40ghash chips per pool (the dream your thinking)
an asic manufacturer just needs to make 10,001 4thash rigs and bam.. they have more power then the other pools.

right now antpool has 88,000 4thash rigs running

so lets say it was 10million devices per brand. the consumer only gets 72sats. and an asic manufacturer only needs to make 100,001 asics to outcompete.

knowing that the hashrate moves up by 10% every few weeks. antpool will have that hashpower in a month.. yet how long do you think it would take a phone manufacturer to not only design a phone with a chip in it, but also to get it on the market.

do you really think that iphone can saturate the bitcoin market with lets say 100 million phones in the next couple years?(giving people 7sat a day)
or do you think that antpool will get to a couple exohash before that..

[RealBitcoin]

2) Not necessarly that way, but what I mean is that the manufacturer to sell the parts to assembly plants. The manufactoring factories have always the lowers profit margin so, an extra middleman here is actually beneficial. Then if you worry about assembly plants being greedy, then just have many of them. It's easier to assemble it from parts than to make the parts, and it's the assembler that would be the greedy one. So just have more assemblers than manufacturers and the price should come down. An extra middleman in this case is probably good.

that worked out so well for Butterfly labs.. 2 years on and they couldnt even release an end product.

its actually cheaper to have the manufacturing and mining facility right next door to each other (1 hour delivery at most). instead of making the chips in china/europe shipping them to america and then have someone at $9 an hour making the rigs and then another group of guys at $9 an hour supervising the mining(fully produced running asics) facility.
sorry but america wont EVER be a good production centre for asics

No because then they just mop up the profits, because they create everything, they will entitle themselves to 8x profit margin as no competitor exists that can compete with the complexity of their business.

If they just make the parts, then the profit margin normalizes to 10-30%.

And the assembler just charges based on supply and demand. Then many hobbyists can just turn this into a business, they buy the parts at factory rates, and assemble it in a garage and sell the mining equipment on e-bay or openbazaar

So the overall retail price then will decrease massively as the manufacturing process will be decentralized as well.