Bitcoin Wiki:Proof of work change hard fork
- 1 Proof of work change hard fork
- 1.1 Purpose of proof of work recap
- 1.2 Problems solved through a PoW change
- 1.3 New layout draft to capture both positions
- 1.3.1 Effects of a single unexpected PoW change
- 1.3.2 Effects of an expectation of ongoing PoW changes
Proof of work change hard fork
Changing the proof of work algorithm has been planned as a solution to ASIC mining centralization since as early as 2012 when Butterfly Labs first announced their intention to produce the first mining ASICs.
JW: This history is not relevant to the discussion and should be removed. It also implies that it was agreed upon, by saying it was "planned." This is not true.
LD: It is relevant, because it testifies to the fact that there is no excuse to be ignorant of the possibility of PoW change. It is not sudden or unexpected. Every ASIC miner on Bitcoin who has done basic due diligence is aware that the PoW algorithm may change, and specifically that it will probably change under these current circumstances.
It is expected that by changing the PoW, the mining economy will be given a "restart" back to its original decentralized state.
JW: While it would be "decentralized" until new speciality hardware is developed, it would be vulnerable to attack using specialized hardware. The goal isn't decentralization, but security. In this case that requires commoditization of cutting edge hardware. This approach is similar to creating a "gun free zone" instead of making gun ownership common. In the end only the bad guys will have ASICs.
LD: There is no reason to expect speciality hardware will re-centralise. Incentives will have been made clear to deter that. And if not sufficiently so with one change, we can always change again and again until the message is understood. There is ZERO security from centralised mining. There is no "gun free zone" because ASICs are encouraged.
And the current centralized miner (Bitmain) will incur significant enough financial loss to deter future centralization of the new algorithm.
JW: Well it will certainly slow additional ASIC hardware manufacturers from atempting to build ASICs. But it won't prevent it. To do that we would need to change the PoW every time ASICs were known. The incentive would be to build ASICs and keep them secret. And well funded attackers would be able to invest in the best possible ASICs in order to attack a network that is not defended by the best possible ASICs. Bad in every way.
LD: ASICs are not the same thing as centralisation, and it is not rational to claim their production would be deterred by a PoW change.
Purpose of proof of work recap
The purpose of proof of work is to ensure that the next block is randomly determined from a large pool of entities, without any centralised authority nominating such entities.
Problems solved through a PoW change
- The goal is to restore mining decentralisation.
JW: This would be achieved only until someone, maybe a malicious actor, invested in ASICs.
LD: With a simple algorithm, anyone can produce ASICs, and there would likely be multiple manufacturers. Bitmain only gained an inherent advantage over SHA2 by patenting the AsicBoost exploit.
- By changing the PoW, Bitmain would suffer financial loss.
JW: As would everyone that invested in ASIC manufacturing including competitors of Bitman. In fact the newest entrants would be hurt the worst since they have likely invested the most in ASICs that have not been recouped through sales.
LD: No, see below. (Regardless, nobody was ever guaranteed a profit or break-even, and this risk was known long before anyone mining with ASICs invested in them; they chose to accept that risk.)
- Any competent and benevolent manufacturing competitors to Bitmain would not suffer financial loss.
JW: A PoW change doesn't discriminate. It harms everyone that has invested in SHA256 miners in proportion to their investment.
LD: Competent ASIC manufacturers will design their chips with one or more backup algorithms (likely SHA2-related). This enables discrimination in PoW change scenarios.
- Small miners would be able to mine the new algorithm using different hardware, likely at a higher network percentage than with Bitmain-issued hardware.
JW: Miner centralization is a secondary issue with a PoW change. But miners that have recently entered the competition would be harmed more because they have a higher investment in hardware that has not earned a break even point through mining. Older miners, especially those with equipment nearer end of life, would be effected the least.
LD: Mining centralisation defeats the entire purpose of PoW. It can never be secondary. But to the main point: these miners would still make a larger profit if the PoW algorithm was changed, than if it was not.