An answer to perceived uselessness of PoW hashing - neutrality

[cryptogeeknext]

I often hear people's arguments that PoW hashing is utterly useless outside of the context of PoW system itself and
it would have been nice to do some scientific computations instead.

There have been attempts in the past to employ different types of workloads like protein folding and prime number searching as a basis for PoW with varying degrees of success. And while technical challenges of marrying scientific computations with PoW scheme were the main obstacles for creating a robust implementation, I now think that ideological challenge might be just as big.

If we consider any useful work as a value producer and money as a universal value transmitter between different useful types of work, then introducing unnecessary bias into the money system by favouring one type of useful work over another would reduce universality of money, which in turn would hamper its longevity. Any particular type of useful work might become obsolete over time, while introducing the need to alter the money system to reflect that would only contribute to its destabilisation.

So, to sum it all up (TLDR):
The perceived uselessness of PoW hashing is actually a desired feature (not a bug) as it results in neutrality of the money system towards any type of useful work, which contributes to its stability and longevity. In other words, in emptiness there is all the usefulness.

PS: this is not a discussion of PoW vs PoS as there is an inherent difference in those systems (work creates money vs money creates money), but rather an observation that certain PoW properties might have a deeper meaning than it seems on the surface.

[DumbFruit]

PoW is a way of binding a protocol to time, otherwise there is no way for other computers in the network to know where blocks should be placed in the chain.

Points in time can not be trusted among peers, and therefore time needs to be substituted with blocks and a timestamp.

T₁ -> T₂ -> T₃ -> T₄

Block₁ -> Block₂ -> Block₃ -> Block₄

The blocks are submitted with a timestamp that approximates with the former, but could vary by up to 70 minutes. The timestamps are greater than the median of the previous 11 blocks and less than 2 hours after.

The important part is the blocks (hashes) guarantee that the timestamp always happened after the previous block, so it's trivial to build a blockchain in the correct order as long as blocks are not being spammed over the network. Blocks are not spammed because the difficulty is adjusted such that blocks are only mined once every 5 minutes, which gives the entire network enough time to propagate the block.

If the time is too short, valid blocks are not included in the blockchain; these are called "orphans".

[cryptogeeknext]

PoW is a way of binding a protocol to time, otherwise there is no way for other computers in the network to know where blocks should be placed in the chain.

Points in time can not be trusted among peers, and therefore time needs to be substituted with blocks and a timestamp.

T₁ -> T₂ -> T₃ -> T₄

Block₁ -> Block₂ -> Block₃ -> Block₄

The blocks are submitted with a timestamp that approximates with the former, but could vary by up to 70 minutes. The timestamps are greater than the median of the previous 11 blocks and less than 2 hours after.

The important part is the blocks (hashes) guarantee that the timestamp always happened after the previous block, so it's trivial to build a blockchain in the correct order as long as blocks are not being spammed over the network. Blocks are not spammed because the difficulty is adjusted such that blocks are only mined once every 5 minutes, which gives the entire network enough time to propagate the block.

If the time is too short, valid blocks are not included in the blockchain; these are called "orphans".

Thanks for your contribution.
What you are describing is how the blockchain is formed and the role of PoW _within_ that context. I can't argue with that.

The question I attempted to answer in this thread, however, related to usefulness of PoW _outside_ of that context.

And it seems that when it comes to PoW-based money systems, the inherent _outside_ uselessness of PoW actually translates to neutrality and universality, which are essential properties of any money system contributing to its stability and longevity.

[DumbFruit]

Oh I see, yes that's true. The hash chosen (SHA-256) was picked because it is easy to perform, which aids in verification as well as allows manufacturers to more easily enter the market. Anyone can enter the mining business, since manufacturing ASICS is not as difficult as it would be with other algorithms.

It was hoped that this would lead to greater competition in the mining space to avoid 51% attacks, although I'm afraid that centralized mining is almost a foregone conclusion at this point.

[cryptogeeknext]

Oh I see, yes that's true. The hash chosen (SHA-256) was picked because it is easy to perform, which aids in verification as well as allows manufacturers to more easily enter the market. Anyone can enter the mining business, since manufacturing ASICS is not as difficult as it would be with other algorithms.

It was hoped that this would lead to greater competition in the mining space to avoid 51% attacks, although I'm afraid that centralized mining is almost a foregone conclusion at this point.

I think hashing (SHA-256, Scrypt) is the most suitable type of workload, which satisfies one important condition - it must be hard to find the result, but very easy to check if the result is correct. That was probably number one reason why scientific computation didn't qualify for PoW as checking for correctness would require significant amount of re-computation on other nodes.

As to the question of mining centralization, it does seem like major players are getting bigger over time, however they are still spread out on the surface of the planet, so the problem might not be as acute as some prefer to paint it.

Who knows maybe Bitcoin is destined to become a new international settlement system and various governments controlling mining farms on their own land is Bitcoin's intended destination. It would still be an improvement over fiat monetary system we have now as long as governments don't collude, and today they are eager to demonstrate some competition (US/Europe/Russia/China). So I would be interested to see how PoW mining scenario plays out in a long term, while keeping an eye on a more lightweight and much more decentralized solutions for end-users.

[TonesNotes]

All space heaters sold from now on should be bitcoin mining machines....

[Jybrael]

All space heaters sold from now on should be bitcoin mining machines....

Where can I get my hands on those space heaters :-D. Well in my opinion PoW is a good system to properly reward the coins.

[cryptogeeknext]

All space heaters sold from now on should be bitcoin mining machines....

True enough
I guess, as Bitcoin's valuation grows, the market will recognize this as an oportunity.

I also thought about equipping hardware wallets with mining chips, like those used in small USB miners.
We will see how it goes, the fight for decentralization isn't over!

[RobertDJ]

Oh I see, yes that's true. The hash chosen (SHA-256) was picked because it is easy to perform, which aids in verification as well as allows manufacturers to more easily enter the market. Anyone can enter the mining business, since manufacturing ASICS is not as difficult as it would be with other algorithms.

It was hoped that this would lead to greater competition in the mining space to avoid 51% attacks, although I'm afraid that centralized mining is almost a foregone conclusion at this point.

Even though it is likely that mining will likely become more centralized in the future (via large corporate mining farms), the miners will still have an incentive to mine honestly as the reward will be greater for doing so over the long term.

I would also say that it is realistic to say that ASIC manufacturers will eventually be able to develop new machines at a cost low enough so they can sell ASICs to "retail" customers at prices low enough so they can expect to ROI in the future which would cause the network to remain decentralized

[runam0k]

Oh I see, yes that's true. The hash chosen (SHA-256) was picked because it is easy to perform, which aids in verification as well as allows manufacturers to more easily enter the market. Anyone can enter the mining business, since manufacturing ASICS is not as difficult as it would be with other algorithms.

It was hoped that this would lead to greater competition in the mining space to avoid 51% attacks, although I'm afraid that centralized mining is almost a foregone conclusion at this point.

Even though it is likely that mining will likely become more centralized in the future (via large corporate mining farms), the miners will still have an incentive to mine honestly as the reward will be greater for doing so over the long term.

I would also say that it is realistic to say that ASIC manufacturers will eventually be able to develop new machines at a cost low enough so they can sell ASICs to "retail" customers at prices low enough so they can expect to ROI in the future which would cause the network to remain decentralized

Totally agree.  You can't declare that centralised mining will kill Bitcoin without considering that the very people who would want to avoid too much centralisation are the miners themselves!  The system is necessarily self-regulating in that sense.  The more centralised mining becomes, the less secure Bitcoin is and the less valuable bitcoins are.  When value is impacted, the miners will respond.  I can easily imagine huge mining corporations spinning off separate mining entities to avoid becoming too large themselves.

[cryptogeeknext]

Oh I see, yes that's true. The hash chosen (SHA-256) was picked because it is easy to perform, which aids in verification as well as allows manufacturers to more easily enter the market. Anyone can enter the mining business, since manufacturing ASICS is not as difficult as it would be with other algorithms.

It was hoped that this would lead to greater competition in the mining space to avoid 51% attacks, although I'm afraid that centralized mining is almost a foregone conclusion at this point.

Even though it is likely that mining will likely become more centralized in the future (via large corporate mining farms), the miners will still have an incentive to mine honestly as the reward will be greater for doing so over the long term.

I would also say that it is realistic to say that ASIC manufacturers will eventually be able to develop new machines at a cost low enough so they can sell ASICs to "retail" customers at prices low enough so they can expect to ROI in the future which would cause the network to remain decentralized

Totally agree.  You can't declare that centralised mining will kill Bitcoin without considering that the very people who would want to avoid too much centralisation are the miners themselves!  The system is necessarily self-regulating in that sense.  The more centralised mining becomes, the less secure Bitcoin is and the less valuable bitcoins are.  When value is impacted, the miners will respond.  I can easily imagine huge mining corporations spinning off separate mining entities to avoid becoming too large themselves.

Good point.
Also mining usually operates at the fringe of the profitability threshold, thus the cost of screw-up is quite high encouraging miners to play by the rules, or risk losing ROI.