Why Bitcoin Mining Needs Stratum V2
The Bitcoin mining is centralized, but how real is the risk of network censorship? And can a protocol called Stratum V2 save the industry?
This is an opinion editorial by Federico Rivi, author of the Bitcoin Train newsletters.
<figcaption><a rel="nofollow noopener" target="_blank" href="https://twitter.com/peterktodd/status/1622604123949436929?s=20&t=T-cCtgpVaj4BV0KotWxADA"><em>Quelle</em></a></figcaption> </figure><p>Bitcoin-Mining für jedermann erreichbar: Haushaltsgeräte, tragbare Geräte wie Smartwatches und Datenbrillen, die alle mit speziellen Mikrochips schürfen können. Das ist die Zukunft, auf die viele Bitcoiner hoffen.
While such a scenario might not be that far removed from the reality that awaits us, we are still in Bitcoins today genesis Chapter and the reality is not yet what Antonopoulos predicted. In fact, mining is becoming centralized.
Last month, Foundry USA alone coordinated 34% of the hashrate. If we add Antpool, which accounts for 18.2% of the total hash rate, we have 52% of Bitcoin’s global computing power in the hands of just two mining pools.
The well-known Bitcoin developer Peter Todd recently pointed out the problem of this centralization:
“Bitcoin is dead.” “Mining is over.” “They will regulate bitcoin.” “Censorship will come.”
I can already hear you, but we should stay calm. To understand what the implications are – and what the solutions are – we need to step back and review the concept of “pool mining”.
This is what awaits you in this article
The evolution of pool mining
Would you rather receive $100,000 every five years or $20,000 once a year? The answer to this question from most explains the emergence of mining pools.
In the long run, the payout stays the same, what changes is the frequency with which the payment is received. In a highly competitive environment like mining, this is crucial. It can make or break the survival or bankruptcy of mining farms, which — regardless of how the Bitcoin price changes — must keep machines running by paying for electricity, as well as any loans needed to purchase hardware or other expenses were recorded.
A mining pool is a server, usually run by a company, that brings together mining farms and individual miners in different territories, pooling their computing resources and combining them as a product of a single team participating in the competition that is bitcoin mining. The high computational power coordinated by the pools allows, compared to the low chances of the individual miner, to win the proof-of-work contest more frequently and redistribute the reward to all its members in proportion to the computational power they have have provided.
Let’s take an example: running a mining farm that produces 0.025% of the global hash rate – an activity that today requires a multi-million dollar investment – allows the miner to mine one block of bitcoin for every 4,000Blockchain to write. Taking into account the average rate of one block produced every 10 minutes, this means one block reward is earned per month currently worth 6.25 bitcoin.
However, with the same computing power available, one can choose to join a mining pool that controls say 25% of the global hash rate. Statistically the pool will probably mine every fourth block, i.e. one every 40 minutes. The mining farm that has decided to join is compensated in proportion to the computing power provided, so it always yields the equivalent of one block per month, but is paid every 40 minutes on average (more often pools pay the rewards). once per day to reduce fees).
Joining a pool makes the future more predictable as the payouts, while not necessarily larger than solitaire mining, are more frequent. The first pool emerged in 2010 under the name Slush Pool, now known as Braiins Pool, and since then the model has evaporated.
As discussed above, much of the computing power of the network is now in the hands of the pools, which inevitably represent points of centralization.
So what is the current status of mining and what are the risks?
The Rise of Foundry USA
On February 15, 2021, Foundry USA pool coordinated 0.98% hash rate. Two years later, the number has risen to 34%. What happened in the meantime?
Source: Crypto News Deutsch