Lost, computing power is monopolized by large mining farms

Marx once said: "If there is a 100% profit, the capitalists will take risks; if there is a 200% profit, the capitalists will defy the law; if there is a 300% profit, then the capitalists will trample on everything in the world!" Satoshi Nakamoto envisioned Bitcoin as a sufficiently decentralized autonomous system where anyone has the power to participate and gain the right to speak. However, driven by interests, the trend of computing power centralization is irreversible. The 51% attack is not only the sword of Damocles hanging over Bitcoin, but the BCH computing power dispute that has not yet been settled and the 51% attack on ETC (Ethereum Classic, Ethereum fork coin) have become the last straw that breaks the camel's back for the POW consensus mechanism.

Marx once said: "If there is a 100% profit, the capitalists will take risks; if there is a 200% profit, the capitalists will defy the law; if there is a 300% profit, then the capitalists will trample on everything in the world!" Satoshi Nakamoto envisioned Bitcoin as a sufficiently decentralized autonomous system where anyone has the power to participate and gain the right to speak. However, driven by interests, the trend of computing power centralization is irreversible. The 51% attack is not only the sword of Damocles hanging over Bitcoin, but the BCH computing power dispute that has not yet been settled and the 51% attack on ETC (Ethereum Classic, Ethereum fork coin) have become the last straw that breaks the camel's back for the POW consensus mechanism.

——The nun said

Text | Nun Miejue

Produced by | Alpaca Blockchain Planet Daily Baker Chain China Chain Media Chain Certificate Economy

Photo | Kira

In the previous article we introduced:

Bitcoin's accounting and reward system is similar to the process of solving elementary school math problems. The child who solves the problem the fastest obtains the right to keep the account and is rewarded by the teacher. In the Bitcoin system, the mining machine with the fastest calculation obtains the right to keep the account and a considerable amount of Bitcoin rewards.

Computing power is computing ability, or more precisely, the ability of the system to calculate hash functions. In the Bitcoin system, the factor that influences the right to record blocks is computing power.

As a result, miners are constantly engaged in an arms race to compete for Bitcoin rewards. On the one hand, mining equipment is constantly upgraded, with higher performance and efficiency. On the other hand, computing power is concentrated, forming a group operation of mining farms.

1. In order to improve mining efficiency, mining equipment is becoming more and more efficient.

The scenario originally envisioned by Satoshi Nakamoto was that everyone would have a computer, participate in the Bitcoin system through the Internet, and receive corresponding Bitcoin rewards through mining.

Bitcoin mining has gone through the following five eras:

1. CPU mining can be understood as our home computers, which were still usable in the era of Satoshi mining

2. GPU (graphics card) mining The guy who used 10,000 bitcoins to buy pizza was the earliest GPU miner, that’s why he was so rich, because he mined a lot of coins at that time

3. FPGA mining (short-lived, not yet scalable)

4. ASIC mining is the mainstream mining machine now, which can only calculate the function problem of mining Bitcoin.

5. Large-scale cluster mining (mining farms)

With the development of the Bitcoin system, people have discovered that current personal computers have low computing power and are unable to participate in mining competitions. Therefore, they have begun to develop more professional mining machines to increase their computing power.

Let's take a look at how small the computing power of a personal computer or a single mining machine is...

The following figure shows the network mining difficulty curve and the current network computing power as of February 11, 2019.

The mining difficulty curve of the entire network and the current network computing power

The difficulty of the Bitcoin system is dynamically adjusted every two weeks. If the average block time in the previous cycle is less than 10 minutes, the difficulty will be increased, and if it is greater than 10 minutes, the difficulty will be reduced. The purpose is to ensure that the system stably produces one block every 10 minutes and rewards 12.5 bitcoins. Therefore, the more mining machines involved in mining worldwide, the greater the total computing power of the entire network, and the difficulty of mining has to rise accordingly to ensure that the system can proceed in an orderly manner according to the rule of one block every 10 minutes.

At this moment, the difficulty of Bitcoin mining is: 8.51T

The total network computing power reached: 41.59EH/s

That is: 41,590,000,000,000,000,000,000 times per second (hash function).

For those of us who are not IT professionals, I guess we don’t understand what these numbers and units mean. Let me pour you a basin of ice water to sober you up:

Even with the latest and most powerful Whatsminer M10 mining machine, which has a computing power of 33GH/s, it takes 700 days (1.9 years) to mine one Bitcoin.

The Ant S9 mining machine with the highest market share takes 1,712 days (4.7 years) to mine one bitcoin.

If you still try to mine with a GPU (graphics card) - the most popular mining method before 2013, it would take 34,000 years to mine one Bitcoin.

Not to mention the CPU mining method used in the Satoshi era, it would probably take hundreds of billions of years to get a single Bitcoin...

2. From scattered guerrillas to group army operations, computing power gradually became centralized and monopolized, and mining farms came into being

As the saying goes: There is no gain without pain. People found that a single mining machine has less and less advantage in the competition for block accounting rights. The way of single-soldier operation is gradually abandoned, and it has become a general trend for miners to join forces and merge computing power. With the development of mining machine technology, people found that in order to obtain large-scale computing power, multiple computers can be combined to form a larger computing power device to participate in mining together. At this time, centralized mining pools gradually emerged.

The earliest mines were very simple, as dirty and messy as a chicken coop. Mining began in a shack...

Early Mines

Today's mines have long been scaled and industrialized, and have professional dust removal and temperature control systems.

Modern mine

Why do mines appear?

The efficiency of solving problems by one person is too low, so everyone can solve them together, which makes the calculation faster. The computing power of a single mining machine is too low, so if more mining machines are combined, the computing power will be stronger, and more bitcoins will be mined. In the end, everyone will share the coins according to their computing power contribution.

The top five mining farms monopolize 65% of the computing power!!

Currently, the mining pools with the largest computing power in the world include BTC Pool, F2Pool, AntPool, Poolin, Slushpool, ViaBTC, etc. The computing power of the top five mining pools alone exceeds 65% of the total network computing power. Except for Slushpool, the rest of the mining pools are from China.

Mining pool hashrate distribution chart for the last 3 days

In the history of Bitcoin development, mining pools have become an indispensable infrastructure. Miners jointly access a mining pool and participate in the competition for the right to record blocks in the name of the mining pool. Since the computing power of a single mining machine is difficult to compete with the huge computing power of the mining pool, it is almost impossible for a single mining machine to obtain the right to record Bitcoin.

The only option for mining machines is to connect to a mining pool. The rewards from the mining pool are distributed according to the computing power of the participants.

51% hash rate attack: The sword of Damocles hanging over Bitcoin

The so-called 51% attack means that the computing power of someone (or a mining farm) in the entire network exceeds 51% of the entire network.

As mining enters the era of joint operations of "mining farms", blockchain projects such as Bitcoin and Ethereum that use the POW consensus algorithm - that is, miners prove themselves to be loyal and trustworthy bookkeepers by calculating electricity consumption functions - have deviated from the original intention of "decentralization" when Bitcoin was first created. A few mining farms can control more than 51% of the total computing power, which has become a sword of Damocles hanging over Bitcoin.

Sword of Damocles

What will be the consequences if a 51% attack occurs?

The entire blockchain network will be exposed to multiple attack risks, such as:

Selfish mining: continuously mining new blocks and then taking all mining rewards and transfer fees.

Cancel all transfers: Not accepting any transfers in any block also means that the network is completely destroyed.

Double Spending: Translated from the English Double Spending, it means that the money is spent twice, and the same coin is transferred twice at the same time. Under normal circumstances, the transfer will only be finally confirmed after the miner includes the transfer information in the block. Even if two transfers are initiated, the miner will only confirm the transaction once to avoid the "double spending" problem. However, in the case of a 51% attack, the attacker is the last person to put the new block into the blockchain. He can initiate a "double spend" at any time and put both transfers into the block.

Random forks: As the name implies, forked coins are side branches on the main chain, just like cloning a twin brother to copy another chain. Forked coins were popular for a while in 2017. Bitcoin alone forked 98 forked coins, which were jokingly called "copycat coins" in the industry. In just over a year, at least 28 projects have completely disappeared.

The value of Bitcoin comes from the consensus of the public, but the community is constantly controversial about Bitcoin. When community conflicts evolve into irreconcilable situations, it often causes a "hard fork" of the project. "Hard fork" is essentially when there are two opinions in the community, each with a set of solutions on the project technology. After they cannot be coordinated, they will fork into two different blockchains to implement their own technical solutions. The most famous are Bitcoin Cash BTC and Ethereum Classic ETC.

With mining farms monopolizing computing power, will Bitcoin become a centralized tool?

How serious is the monopoly of computing power in Bitcoin mining farms at present?

The top five mining pools account for more than 65% of the network’s computing power, and the top ten mining farms control nearly 90% of the computing power.

As early as 2014, the Ghash.IO mining pool owned by the then famous mining machine manufacturer "Baked Cat" had reached a hash value close to 51%. Subsequently, the mining pool issued a voluntary statement, promising that the computing power would not exceed 39.99% of the overall hash value of Bitcoin, resolving the public's trust crisis.

Today, Bitmain, a famous mining machine manufacturer that controls 70%-80% of the market share, is also facing the same crisis of trust. Bitmain has two major mining pools, BTC Pool and AntPool, while ViaBTC is a company invested by Bitmain. The three mining pools that are closely connected with Bitmain control a total of nearly 48% of the computing power. Therefore, Jihan Wu, the founder of Bitmain, is known as the "mining tyrant" and is feared by the entire Bitcoin world.

ETC suffered a 51% attack, leaving the entire mining world in shock

ETC, Bitcoin Classic, is the most famous forked coin on Ethereum. Blessed by Ethereum's status in the industry, ETC is also a well-deserved top token. Its current market value ranks 18th, exceeding US$430 million.

From January 5 to 7, 2019, data from the PeckShield platform showed that the ETC network suffered a 51% attack, and suffered at least 11 suspected double-spending attacks, with a loss of 88,500 ETC. Subsequently, the trading platform Gate.io issued an announcement confirming that the ETC network suffered a 51% attack. They detected a total of 7 rollback transactions, and the attacker used the computing power advantage in his hands to force the previously confirmed transfer records to become invalid. As of January 8, there were at least 15 suspected double-spending transactions. Coinbase borne most of the losses from this attack. The report stated that a total of 219,500 ETC were attacked, equivalent to approximately US$1.1 million.

Although the victimized exchanges received ETC returned by the attackers in the following days, the attack ended as a prank or a well-intentioned reminder, and the value of ETC did not completely collapse because of the attackers' "return of the jade intact", the sword of Damocles still hangs over the POW consensus algorithm, and all miners and investors are still lambs to be slaughtered. We can only hope that the big miners will be kind and benefit all living beings...

Some people once thought that 51% attack was a paradox. That’s right, but that’s Bitcoin’s 51% attack paradox, not POW’s 51% attack paradox!!

The 51% attack has always been the most worrying part of the POW consensus algorithm. From the perspective of economic game theory, launching a 51% attack is a foolish act of "hurting yourself 1,000 and hurting the enemy 800."

On the one hand, launching an attack requires enough money to control 51% of the computing power of the entire network, which will be a very large investment. On the other hand, after the attack, the price of the currency will be affected or even collapse. The attacker may not be able to sell the tokens that he has "grabbed" with great effort, and lose all his money. Therefore, rational people will not launch a 51% attack in order to obtain greater benefits. This is the 51% attack paradox.

However, as you can see from the following "POW 51% Attack Cost Table", this is the current mainstream encrypted digital currency project that uses the POW proof-of-work algorithm:

Except for Bitcoin, which costs more than $280,000 per hour, Ethereum, which costs $80,000 per hour, Litecoin and ZCash, which cost tens of thousands of dollars per hour to launch an attack, other tokens only cost a few hundred to a few thousand dollars.

Launching a 51% attack only takes a few hours to complete a beautiful sniper battle, which is not really a "very expensive" financial cost.

Maybe a few young men can stir up a storm by making a small bet or playing a prank...

Why is it so easy to launch a 51% attack?

Take the ETC attack as an example: because mining requires time and electricity costs, the ETC market value has dropped, miners are unprofitable, and have left the market. The network size continues to shrink, and the network computing power has also dropped. It is very easy for attackers to launch attacks by leasing computing power. The cost of launching an ETC attack for one hour is only $4,910. The attack lasted for a total of 4 hours, and the total cost was only $20,000. They stole nearly 220,000 ETCs, worth about $1.1 million. This 50-fold input-output ratio...

The BCH hash rate war, the battle between two men to defend their interests, completely destroyed the reputation and belief of the POW consensus algorithm!

On August 1, 2017, the miners led by Bitmain and the core developers led by Bitcoin Core conducted a hard fork on Bitcoin. The new Bitcoin supported by the miners was named BCH (Bitcoin Cash), while the original Bitcoin BTC continued to be maintained by the core developers. There was no computing power war in this hard fork. The miners voluntarily switched their computing power to the BCH (Bitcoin Cash) chain to support BCH mining.

Computing Power War: Wu Jihan vs. Craig Wright

But in November 2018, BCH ushered in a new hard fork. Wu Jihan of Bitmain and Craig Wright, who controls the large mining pool Coingeek, declared war on major media, saying that they would use their computing power at all costs to protect the chain they favored. BCH had a hard fork at the time, with Bitmain's mining pool supporting the BCH ABC chain and Coingeek supporting the BCH SV chain.

When the two chains forked, Wu Jihan and Craig Wright used commercial subsidies to divert the mining pool's computing power and directly switched the mining pool's computing power to the corresponding BCH chain. They suppressed the other party with higher computing power and gained an absolute advantage after seizing the length of the BCH chain. In the end, the BCH ABC chain supported by Bitcoin won and continued to maintain the BCH brand.

The computing power war was thrilling, but the result was a mess.

Does the mining pool have the right to misappropriate computing power to achieve its own goals without the miners’ permission?

After all, mining pools only provide information integration platforms and cooperative mining methods for miners, and they should obtain the consent of miners before they can achieve their goals. If cases of misappropriation of computing power occur frequently, how can the trust foundation of the blockchain world not collapse?

end

When mining farms appeared, the proof of work (PoW) had already quietly reached the edge of the cliff, because mining farms are centralized, and the essence of Bitcoin and PoW is to pursue decentralization. It has evolved to this day and has deviated from its origin and core spirit!

Satoshi Nakamoto, can you not be sad...

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