Bitcoin Wiki:Proof of work change hard fork

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Revision as of 02:51, 8 March 2018 by JW (talk | contribs) (Proof of work change hard fork)
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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. Comment from 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.

It is expected that by changing the PoW, the mining economy will be given a "restart" back to its original decentralized state. Comment from 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.

And the current centralized miner (Bitmain) will incur significant enough financial loss to deter future centralization of the new algorithm. Comment from 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.

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.

  • 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.

  • 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.

  • 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.