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Author Topic: How I am helping Bitmain destroy Bitcoin  (Read 286 times)
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March 22, 2017, 11:57:37 PM

copied from reddit

Just before Christmas, I finally decided to start mining Bitcoin, mainly because my basement is cold enough right now that I could plausibly explain my behavior to my wife.
I bought a used Antminer S7. There aren't a lot of options out there these days if you are in the market for a reasonably priced basement heater that sounds like a shopvac trying to suck up a grapefruit...
Bitmain has emerged as a major threat to the decentralization of Bitcoin. They control too much of the production of mining hardware. They control too much of the hashpower.
I know very little about China, but I remember a podcast from a couple of years ago about how big business works there, and it matches my observations.
Basically, the way it works in China is you throw all of your money at growing your business into a near monopoly. Once you win the war of attrition and all of your significant competitors are bankrupt -- then you can start thinking about turning a profit. Until then it's all losses.
Here is an example from the solar panel industry:
Recall this quote from KNC Mining:
We have tried to calculate the amount of money that the Chinese have invested in mining, we estimate it to be in the hundreds of millions of dollars. Even with free electricity we cannot see how they will ever get this money back. Either they don’t know what they are doing, but that is not very likely at this scale or they have some secret advantage that we don’t know about. - Sam Cole, KNC CEO
It seems likely that Jihan Wu's strategy is for his company to, for all practical purposes, become the source of all of bitcoin's hashpower, and one way or another, collect all of the transaction fees.
If that is the strategy, a couple of things start to make sense:
The core developers are a major threat to Bitmain's dominance, because they can code a way out from them if they become abusively rent-seeking or an obvious threat to decentralization, or begin censoring transactions at the request of the Comunist Party. The core developers are the only group in position to credibly lead an initiative to change the POW algorithm for example.
The lightning network is an important competitor for fees, and a threat to censorship which must be strangled in the crib. All of the fees must be paid to Bitmain, and it is intolerable for lightning nodes to siphon off fees. All transactions must be subject to a veto from Bitmain -- opaque batching is a no-no.
Threats to centralization are irrelevant. Bitmain's ambition is to deal with the trust problem by winning and controlling the hash-power. Not by cultivating a decentralized ecosystem and separation of power. For the rest of us, well we have to trust Jihan to act in our best interest.
Blocks are going to need to be bigger. MUCH bigger, so that Bitmain can process more and more of the world's transactions and get a larger and larger amount of fees. Your ability to run a full node on your home computer is not a priority.
The Chinese government probably doesn't have any problem with this, and possibly is throwing money at Bitmain to make it happen. After all, they will ultimately be able to steer Bitmain, and therefore Bitcoin, in whatever direction is beneficial to the Communist Party.
How are my conspiracy theory skillz?
Another thing to think about. The big block crowd has for a long time used discussion in ways that remind me of the pro-Trump propaganda that flooded Reddit for the past year. (e.g. name-calling, accusations, speaking to passions, black-and-white thinking, thought narrowing labels) To the big blocker guys who may be reading, I'm sure I sound like a suppressive person. :-) I wouldn't want to accuse all of you of being paid shills. Even if we know that Roger Ver appreciates the power of incentivizing social proof so much that he is developing tools to help shills get paid in clever and innovative ways.

This got a little more attention than I thought and I want to soften my stance somewhat.
This is speculation on my part. I don't know what Bitmain's strategy is. They may have pretty benign plans.
It isn't my desire to bash Bitmain or say they are a bad company or lead by bad people. Indeed, I am helping them in a small way by propping up the secondary market for their products. I don't condemn myself for that; I don't condemn them for trying to be the #1 ASIC manufacturer.
I'm very glad Bitmain is in business, making high quality bitcoin miners, and selling them to the public.
I hope I don't come off sounding critical of Chinese culture. I'm sure there are things about Chinese culture worth criticizing, just as there are things about American culture worth criticizing, but I know very little about Chinese culture and am not interested in making judgments about it. As has been pointed out in this thread, the attrition strategy is not unique to Chinese companies -- it is inherent in the economics of competing companies. It is my impression that for whatever reason (cultural/regulatory/legal/political...whatever) the attrition strategy is more widespread or pronounced in China than it is in the USA.
Ultimately, moral tools (e.g. praise and blame, trying to modify desires) are going to be too weak to create the strong foundation Bitcoin needs. What we need is good game theory, diffusion of power, and opponent processes pushing on each other with negative feedback loops dampening the system to stability.
I originally wanted to buy an Antminer R4, which was billed as quiet. They sell out quickly, leading me to believe that an under-served market exists for home mining. A lot of people have cold basements. A quiet miner pulling 1200 watts in a non-hideous housing for about $500-$1000 would find a niche. Bonus points if the hashing boards can be pulled out and upgraded each winter.

Bitcoin Cash (BCASH) is NOT the real Bitcoin
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