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Author Topic: Doesn't the increase in difficulty lead to centralization?  (Read 957 times)
SeeBettor
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March 12, 2014, 08:15:21 AM
 #1

I first heard of BTC in the summer of 2011 when I had considered playing BTC poker after "Black Friday". Unfortunately I didn't get into it then; and didn't research and understand it. When I regret not jumping on-board then, I just remind myself about the guy who bought the ten-million dollar pizza.

For a couple months now, I've been following and absorbing all I can.

I know there is a lot of discussion about how mining started off with CPU's then went to GPU's and now specialized mining hardware. It's no doubt gone from being a widespread P2P effort and become a venture for the dedicated handful of people or groups that invest in the hardware and resources and choose to compete.

My question is; what is to stop or limit this continued taper of the mining effort into fewer and fewer people or companies? It seems that, in the future, the ones with the ability to produce the most powerful hardware will become less and less. Does this not ultimately lead to centralization?

What is to stop one high-dollar dedicated group from having a huge majority of the mining power? What is to stop one high-dollar dedicated group from having control over the manufacturer of the best hardware, and control over limiting the sale of the hardware to others?

Of all of the vast amount of questions, speculation, dreams, concerns, about so many different parts of the system that would eventually lead to a much more widespread adoption of BTC, this is the one thing that I cannot come to grips with. Please enlighten me as to what dynamics might limit this potentially centralizing effect.
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superresistant
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March 12, 2014, 08:24:33 AM
 #2


Well, it is already too late.

The network is highly centralized through mining pool and specialized hardware.

PoW doesn't work in the long term because the network get weaker. As the network get weaker, people withdraw their money.

People should stop with the mining scheme and go for Proof-of-Stake.
greenlion
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March 12, 2014, 08:34:02 AM
 #3

CPU mining was way more vulnerable to centralization, because it's much easier for large organizations to deploy massive general-purpose computing through botnets and conventional supercomputers.

Supercomputing facilities routinely in service for governments and corporations are already composed of the equivalent of hundreds of thousands of general-purpose CPU's each. If CPU mining were still the normal proof-of-work implementation, malicious re-purposing of just one such facility would constitute more than a 51% attack right off the bat.

It's way too early to come to conclusions about ASICs producing centralization, because the production and marketing of these solutions is so new and the competitive space is highly immature. While it's true that certain aspects of efficiency maximization suggest economies of scale in physically locating the hardware, it's a delusion to somehow thing that just because general-purpose computer hardware is easy for regular people to get that would be more conducive to decentralization.
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March 12, 2014, 08:50:31 AM
 #4

Hmm, you could sacrifice your computer resources by running a CPU miner basically having to buy a whole computer if you want to mine Bitcoins since you cannot do anything else while it is mining.

Or you can buy an ASIC for 100 bucks that plugs into your USB that can be running while you plug away at whatever you want on your computer.

I never mined bitcoins until I bought an ASIC on ebay. Before that it was always too complicated and would have slowed down my computer while trying to do anything on it.

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March 12, 2014, 08:58:00 AM
 #5

My take on this issue:
http://fieryspinningsword.com/2013/10/02/asic-will-not-centralize-bitcoin-mining/

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March 12, 2014, 12:28:04 PM
 #6

Looks like everyone in the thread, through Bitcoin bias, forgot we're in a free market for this issue already.  There are effectively CPU only coins, ASIC only coins, shared GPU and ASIC coins (Litecoin), and shared GPU/CPU coins with much more emphasis on the GPU part (darkcoin & vertcoin).

The free market has created a solution for most mining variables.

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davidgdg
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March 12, 2014, 01:37:54 PM
 #7

The issue is not economies of scale. It is risk aversion. Most miners prefer a high probability of a low reward (pool) to a low probability of a high reward (solo). The solution is P2P pooled mining. The issue is exactly the same whatever the mining technology (thus Litecoin offers no solution whatever)

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March 12, 2014, 01:42:05 PM
 #8

Bitcoin is going to die out.. and a new better cryptocurrency will replace it obviously, PoS is the way to go, not PoW. Similar to what another poster said above^^^^

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March 12, 2014, 01:55:15 PM
 #9

The issue is not economies of scale. It is risk aversion. Most miners prefer a high probability of a low reward (pool) to a low probability of a high reward (solo). The solution is P2P pooled mining.

Other than feeling good about participating in a fairer system, would there be selfish incentive to join a P2P pool vs. joining a cartel pool?
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March 12, 2014, 02:01:04 PM
 #10


Well, it is already too late.

The network is highly centralized through mining pool and specialized hardware.

PoW doesn't work in the long term because the network get weaker. As the network get weaker, people withdraw their money.

People should stop with the mining scheme and go for Proof-of-Stake.


No.  There was a time when there was not enough ASIC competition and two huge firms gobbled up too much of the network.  They were NOT evil or malicious, they just wanted to make money.  They did nothing wrong.

Now there is a healthy market with pretty good competition as of just the past few months and the network is getting more decentralized again.   

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March 12, 2014, 02:23:59 PM
 #11

There is no other way than "centralisation", I mean that not every normal PC can mine profitable. If it was only CPU, miner with big CPU-hardware would mine. 30 cores or botnets.

Consider this: 1 000 000 computer mine Bitcoin, all the same notebook with the same hashrate. This means, that everyone would get every 1 000 000st block, so every 20 years.
-> so you need pools!

Every notebook would consume about 1.5kw every day, so $0.2 cost and mine about 0.0036btc, so about $2.
-> sounds great but is not realistic. If you have such a profit margin, people would buy bigger and more efficient cpus. And they will buy and use it, until you - with your less efficient computer - are not profitable anymore. At the best you make 1 or 2 cents a day. Gratulations for running your notebook on full power 24/7.

So even if there was no specialized hardware, noone could mine with his normal PC. This is only possible, if one bitcoin is nearly worthless (onone knows about it -> less miner!)

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March 12, 2014, 02:33:29 PM
 #12

I first heard of BTC in the summer of 2011 when I had considered playing BTC poker after "Black Friday". Unfortunately I didn't get into it then; and didn't research and understand it. When I regret not jumping on-board then, I just remind myself about the guy who bought the ten-million dollar pizza.

For a couple months now, I've been following and absorbing all I can.

I know there is a lot of discussion about how mining started off with CPU's then went to GPU's and now specialized mining hardware. It's no doubt gone from being a widespread P2P effort and become a venture for the dedicated handful of people or groups that invest in the hardware and resources and choose to compete.

My question is; what is to stop or limit this continued taper of the mining effort into fewer and fewer people or companies? It seems that, in the future, the ones with the ability to produce the most powerful hardware will become less and less. Does this not ultimately lead to centralization?

What is to stop one high-dollar dedicated group from having a huge majority of the mining power? What is to stop one high-dollar dedicated group from having control over the manufacturer of the best hardware, and control over limiting the sale of the hardware to others?

Of all of the vast amount of questions, speculation, dreams, concerns, about so many different parts of the system that would eventually lead to a much more widespread adoption of BTC, this is the one thing that I cannot come to grips with. Please enlighten me as to what dynamics might limit this potentially centralizing effect.

I understand how you may feel. It is really useless to regret for not taking the chance when you could.
As with money, the same goes with BTC, the few own most of them . And the ones that can afford to get into mining right now, are giant companies more than individuals. I dont think this will chacnge, mosh hash power will be in the hands of some companies
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March 12, 2014, 02:37:20 PM
 #13

The issue is not economies of scale. It is risk aversion. Most miners prefer a high probability of a low reward (pool) to a low probability of a high reward (solo). The solution is P2P pooled mining. The issue is exactly the same whatever the mining technology (thus Litecoin offers no solution whatever)
A more likely solution is Multi-PPS. But in any case, if risk aversion has a solution, then the remaining (alleged) problem is economies of scale.

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March 12, 2014, 02:48:56 PM
 #14

PoW doesn't work in the long term because the network get weaker. As the network get weaker, people withdraw their money.

People should stop with the mining scheme and go for Proof-of-Stake.

Bitcoin is going to die out.. and a new better cryptocurrency will replace it obviously, PoS is the way to go, not PoW. Similar to what another poster said above^^^^

What is with the proof-of-work hate? The same few posters keep trolling. Never any real arguments.
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March 12, 2014, 04:41:01 PM
 #15

PoW doesn't work in the long term because the network get weaker. As the network get weaker, people withdraw their money.

People should stop with the mining scheme and go for Proof-of-Stake.

Bitcoin is going to die out.. and a new better cryptocurrency will replace it obviously, PoS is the way to go, not PoW. Similar to what another poster said above^^^^

What is with the proof-of-work hate? The same few posters keep trolling. Never any real arguments.

Proof of stake really doesn't scale.

"I have x StakeCoin and I can prove it, therefore give me xy more". This makes the concentration of wealth problem unmanageable with a fixed supply. POS coins will be more deflationary than bitcoin, as it makes less sense to spend them. The incentives are structured badly.

Vires in numeris
davidgdg
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March 12, 2014, 04:47:15 PM
 #16

The issue is not economies of scale. It is risk aversion. Most miners prefer a high probability of a low reward (pool) to a low probability of a high reward (solo). The solution is P2P pooled mining.

Other than feeling good about participating in a fairer system, would there be selfish incentive to join a P2P pool vs. joining a cartel pool?


Fair question. Not sure. But if P2P is easy to use and no more expensive, then that should suffice.

"There is only one thing that is seriously morally wrong with the world, and that is politics. By 'politics' I mean all that, and only what, involves the State." Jan Lester "Escape from Leviathan"
davidgdg
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March 12, 2014, 04:49:58 PM
 #17

The issue is not economies of scale. It is risk aversion. Most miners prefer a high probability of a low reward (pool) to a low probability of a high reward (solo). The solution is P2P pooled mining. The issue is exactly the same whatever the mining technology (thus Litecoin offers no solution whatever)
A more likely solution is Multi-PPS. But in any case, if risk aversion has a solution, then the remaining (alleged) problem is economies of scale.

If P2P is not the solution (I don't know the answer to that) then the remaining question is whether larger pools have a significant cost advantage over smaller ones. It's not obvious that they do, though the market shares of the larger pools might suggest otherwise.

"There is only one thing that is seriously morally wrong with the world, and that is politics. By 'politics' I mean all that, and only what, involves the State." Jan Lester "Escape from Leviathan"
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March 12, 2014, 05:06:33 PM
 #18

Pools aside, I believe now is mining more people than year ago and it will increase as more people get into Bitcoin. And obviously average person mine less and less BTC because so many now mining  Sad
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