If they tried to exploit their 'power' in any way, people would just fork the chain and move on. They have no ability to actually take advantage of their position in any meaningful way.
1) As other posters have already noted, these miners have economies of scale already set up to dominate any fork that still utilizes the SHA hash. Changing the hashing algorithm would be akin to creating a whole new coin.
2) All sufficiently de-centralized crypto mining eventually devolves into an electricity arbitrage game. ASICs are way too easy and cheap to build to give anyone a lasting advantage via computing efficiency, and once you normalize for capital costs whoever has the cheapest energy wins. For scale you also need access to lots of bandwidth and proximity to fabrication of the hardware begins to matter since mining is a zero sum game. Given those needs China will probably end up dominating most sufficiently de-centralized crypto mining.
3) You drastically underestimate the political, economic, and social cache of the Chinese miners in both the Bitcoin and general cryptocurrency world. Not only do these guys underpin a niche industry (that's worth lots of $$$), but they have their own network effects at this point.
I think the main takeaway, which forking can never solve, is that the second any kind of decentralized currency shows any kind of value the powers that be will seek to centralize it. This is a problem with TOR just as much as it is a problem with Bitcoin, and one that I'm not sure we can solve today. Maybe one day we'll get another paper from Satoshi solving it for us.
No it wouldn't. The hashing algorithm is not intrinsic to Bitcoin. Changing it doesn't need to impact anything else.
> 2) All sufficiently de-centralized crypto mining eventually devolves into an electricity arbitrage game. ASICs are way too easy and cheap to build to give anyone a lasting advantage via computing efficiency, and once you normalize for capital costs whoever has the cheapest energy wins. For scale you also need access to lots of bandwidth and proximity to fabrication of the hardware begins to matter since mining is a zero sum game. Given those needs China will probably end up dominating most sufficiently de-centralized crypto mining.
That is true for PoW based mining, sure. Proof of stake doesn't have that problem, though.
> 3) You drastically underestimate the political, economic, and social cache of the Chinese miners in both the Bitcoin and general cryptocurrency world. Not only do these guys underpin a niche industry (that's worth lots of $$$), but they have their own network effects at this point.
I agree that they dominate and will continue to dominate hashrate. I disagree that that is a significant problem.
Same thing with PoS you can have individuals using shells to buy a large stake in the currency sure it would take a while but it's not impossible.
AOL's hostile takeover over of Time Warner was valued at ±160 billion dollars at the time, the total market cap of Bitcoin is now 200 billion, if it would be a PoS coin it could be a target of a takeover by corporations yet alone governments.
PoW is also more resilient to hostile take over since you can counter it by investing in more miners, while with PoS if some one gets 51% or w/e number is needed to control the consensus it’s game over and there is nothing to do about it.
So while you might think China can just take over all the mining pools it’s true but it’s reversible whilst if the Chinese population would come to own 51% of any currency and China would say comrades would you kindly turn over your ECoins there is nothing you can do about it other than fork over which would devastate the currency.
So yeah both cases with stake/hashrate are deadly enough with no plan B.
My biggest concern with Bitcoin is that atm we have no guarantee that the Chinese mining cabal doesn’t have 51% already.
With PoS you can’t use the same strategy without negative consequences since you would harm the liquidity of the currency in the process.
You can have some PoS system which would tie the number of new coins created to the liquidity of the network and a few other attributes but I don’t see how this could not be fooled by simple moving currency around the network within wallets in your control or to side channel attacks (primarily gaining controls over wallets in the real world rather than only on the block chain).
That's why we came up with a way to prevent double spending WITHOUT GLOBAL CONSENSUS.
Feedback welcome!
It's not quite that simple - the chain will need to be forked with a protocol whose algorithm doesn't allow these miners to continue to dominate. And achieving consensus on that in the heat of the moment will be non-trivial.
Any fork that continues to use SHA-256 will be a trivial target for attack by these miners; they won't blindly continue to mine the "defunct" chain.
So screw over all the people that made transactions with the hacked bitcoins before the hack was found.
Holy fucking shit! Now that I think about this, it is a massive timebomb waiting to happen! Once you have hacked the bitcoins, you can tumble them with other bitcoins, exchange them to other cryptocurrencies (which are also 1 way transactions so the person exchanging with the hacked coins is completely SOL), or exchange to fiat currencies (although that would probably be the most traceable so probably not). As you tumble and exchange the cryptocurrencies more and more, it becomes more and more difficult to hard fork the currencies to undo the hack.
My wild prediction. At some point:
1: Some black hat will gain a controlling compute share of a cryptocurrency (either the chinese ASIC companies or a massive AWS/google cloud/azure... cloud mining to override the majority share and convince the network that some illegal transactions occurred).
2: They will then proceed to massively tumble the hacked coin through different exchanges through multiple different cryptocurrencies so that hard forking is nigh impossible to undo the hack.
3: Cryptocurrencies all crash because they are susceptible to mining takeovers which cannot be detected quickly enough to hardfork to undo the hack which render their whole design impractical.
digiconomist [0] estimates that current etherum mining cost is 1.3 billion a year, or 3.6 million a day, or 151,000 an hour, or 2,500 a minute.
Multiply by 5 for cloud on demand premiums and you could dominate the etherum network for an entire day for 18 million. You could also do it for free if you can manage do to it with stolen credit cards.
You can't prevent someone from trying to mine, though. Bitcoin would have to develop some sort of defense or constantly be correcting whatever fork was the accepted truth.
Not only that, but if bitcoin dumps its miners as unceremoniously as you describe, it will create a lot of distrust between miners in general and the bitcoin users. I don't know what alternative hashing algorithm you had in mind, but if it becomes mineable by miners of another coin, they may see an opportunity to attack. Without a large community of miners protecting bitcoin, you will have thrown bitcoin to the wolves so to speak. And there is little reason for miners to protect bitcoin against such an attack, after they showed such disregard to the original community of miners.
So, no, miners are not as impotent as you make out.
If tomorrow the miners started freezing transactions and abusing their power, then 24 hours hence at least 10 new forks of Bitcoin would emerge with different hashing algorithms, all vying for dominance. And the next day another 100 would emerge. Which one would win? I don't know, but it'd likely converge relatively quickly.
Now, is this a bad outcome? Ya, it'd cause some short term disruption. No question about it. However, the miners know they can be routed around. And because they know that, they know they can't abuse their power without risking being cut out of the equation entirely. They are very strongly incentivized not to fuck with the network.
What you see is higher transaction fees. It's no 0% or 100% denial of service.