Matt Corallo highlights the critical centralization in Bitcoin mining pools, emphasizing the risk of a single entity controlling 50% of the hash rate, which threatens Bitcoin's foundational principle of censorship resistance.
This episode of TFTC dives into a pressing issue within the Bitcoin ecosystem with guest Matt Corallo, a longstanding Bitcoin developer. The core focus of the discussion is the alarming level of centralization in Bitcoin mining pools and the potential consequences this centralization could have on the network's censorship resistance and overall security.
Marty and Matt examine recent analyses that reveal a significant portion of Bitcoin's hash rate, approximately 50%, is being controlled by what essentially amounts to a single mining pool. This is due to several pools like BTC.com, Binance Pool, Poolin, and others using identical block templates and transaction prioritization, likely indicating they are operating under the same entity, possibly Bitmain's Antpool.
This centralization is problematic because it undermines Bitcoin's value proposition as censorship-resistant money. If a single entity controls enough hash power, it could theoretically censor transactions on the blockchain, which would be antithetical to the ethos of Bitcoin.
Matt expresses his peak bearishness on Bitcoin due to this situation and calls for immediate action. They discuss Stratum V2, a protocol designed to decentralize transaction selection by allowing miners to build their own blocks, which could alleviate some of these centralization pressures. However, the adoption of Stratum V2 has been slow, and miners have yet to demonstrate a willingness to prioritize the network's health over short-term profits.
The episode presents a somber reflection on the state of Bitcoin mining centralization, highlighting the crucial need for decentralization to maintain the core principles of the network. Marty and Matt's conversation serves as a call to action for miners to adopt Stratum V2 and for the community to remain vigilant about the potential risks of centralization.
Matt Corallo's bearishness is rooted in his deep concern for the network's future if miners continue to prioritize short-term gains over the long-term health and security of Bitcoin. The discussion suggests that miners must take the initiative to test and implement Stratum V2 and other decentralizing solutions before the community is forced to consider more drastic measures like changing the proof of work algorithm—a "nuclear option" that could have significant repercussions.
Overall, the episode underscores the importance of aligning incentives with the foundational goals of Bitcoin and ensuring that the network remains robust against censorship and centralized control. It is a powerful reminder that the technology and protocols are in place to protect Bitcoin's integrity, but it requires collective action and responsibility from all stakeholders to safeguard the network's future.
0:00 - Intro
1:27 - The pool problem
11:05 - Miners haven’t switched
18:26 - Miner priorities
24:01 - Taking action
36:34 - Gradually, Then Suddenly
37:12 - Addressing bias
39:22 - Is switching difficult?
42:37 - Nuclear option if someone takes control
47:53 - Solutions
57:14 - Complacency
1:03:03 - Go test StratumV2
1:06:10 - Bitcoin success percentage and wrapping up
00:00:02:25 - 00:00:07:13
Marty
The Corolla takes seven, I believe. Welcome back to the show.
00:00:07:15 - 00:00:10:19
Matt
Thanks. Thanks for having me.
00:00:10:22 - 00:00:13:23
Marty
All right. You seem a little down there right?
00:00:13:25 - 00:00:28:02
Matt
I think. Yeah, that's probably true. I think this may be the peak of my bearishness on Bitcoin as a notorious Bitcoin bear. I think this might be. This might be the peak.
00:00:28:05 - 00:00:34:19
Marty
I mean, the first time around, you said Bitcoin had a 5% chance of success, and below that now.
00:00:34:22 - 00:00:40:21
Matt
We might be. We might be. I think I think things are looking real bad right now.
00:00:40:24 - 00:01:30:00
Marty
All right. Let's get a visualization of how bad things are looking, particularly at the mining pool there. So this is a tweet from Okex. Be ten C, It's done a great job of analyzing the Bitcoin blockchain and particularly keeping an eye on mining pools to see what they're up to, how they're constructing blocks. And him and modern art from mempool out space have been sounding the alarm that it looks like if you look at the Merkle branches that mining pools and the miners as part of a stretch of the stratum jobs, it's clear that the BTC dot com pool, Binance Pool pool and EMC, the raw pool and possibly brains have exactly the same template
00:01:30:00 - 00:01:52:21
Marty
and custom transaction prioritization as antpool. So this equates to about 50% of the mining hash rate as represented by mining pools, essentially handling how blocks are constructed and the payouts as well. So this dictates payouts from a central party as well.
00:01:52:24 - 00:02:00:17
Matt
Yeah, So basically they're all the same pool from the perspective of Bitcoin. These are all the same pool.
00:02:00:19 - 00:02:02:02
Marty
Not good.
00:02:02:04 - 00:02:31:27
Matt
No, no, it's not good. So, I mean, I think it's so it's important to to, to point out why this is a problem. I think so. Bitcoin's value proposition, I would argue, and I hope not so controversially argue, is that it is a censorship resistant money, right? That or more colloquially, Bitcoin is fuck you money. It is money that I can control, that you can stop me from using however I see fit.
00:02:31:27 - 00:02:58:24
Matt
It is freedom money and that comes from censorship resistance. I come from this concept of I can send the money wherever I want and there's no entity or no group of entities that can stop me. And the answer right now is it's clearly not true, right? There's one pool that has near 50% a hash power. You know, throughout all of Bitcoin's history, we had a lot of centralization and pools.
00:02:58:25 - 00:03:33:17
Matt
So, you know, obviously pools ensure that miners get stable rewards and miners want this. And that's really important for the business of a lot of miners. But they also select the transactions. They also select what goes into the Bitcoin blockchain and they can censor. Right. And so there being a large pool that's nearing 50%, that's getting to the point where they could completely censor the Bitcoin blockchain if they wanted to, just by their own decision making should frighten everyone and should be high on the list of worries.
00:03:33:17 - 00:03:39:11
Matt
You know, I don't know. I, I know the prices, but people should not be bullish with this news.
00:03:39:13 - 00:04:09:20
Marty
No. And was this news an accident? Because the way I understand this became apparent to me and not particularly was that he recognized that there was a large consolidation of Coinbase transactions. So it might have been a mishap on behalf of this monolithic pool consolidating all these coin bases that were assumed to be from separate pools that fall under this umbrella.
00:04:09:22 - 00:04:34:11
Matt
Yeah, so on. And I noticed that clearly all of these pools are using the same custodians have basically all the money from all these pools is going in the same place and concluded like, look, they're at a minimum the same custodian. Now that wouldn't be great for Bitcoin, but isn't necessarily all that concerning. You know, it's still if they're separate entities and importantly, if they're separate entities selecting the transactions and creating the work.
00:04:34:14 - 00:05:03:23
Matt
Right. The the important part for Bitcoin is who selects the transactions that go on the net in the blockchain. And as long as there's a lot of those, then hopefully we do okay. But when there is, but then B and C then noted that in fact, no, they're not just using the same custodian, they're actually selecting identical transactions and clearly using the same Bitcoin to select the same transactions.
00:05:03:26 - 00:05:13:24
Matt
So for all intents and purposes, they're the same pool. They're not, they're not separate entities. They might be, you know, separate entities, but they're just proxy for the same pool.
00:05:13:26 - 00:05:25:21
Marty
And so maybe not to play devil's advocate, but to highlight, like why would the miners be comfortable doing this? Is there an advantage in their part?
00:05:25:24 - 00:05:57:27
Matt
Yeah. So I think that I think there are other business reasons here. So what has been what I surmised from talking to a few people is that miners demand basically this fixed paper share payouts. So miners want to be paid the same amount of Bitcoin per share that they submit to their pool irrespective of the current fees. And in the blog template, irrespective of, you know, the block award, whatever.
00:05:57:29 - 00:06:20:23
Matt
And that's really expensive. And and you need a very large balance sheet to actually pay out fixed paper share. So we saw this with pooling going bankrupt six months or a year or two years ago. Right. They offered six pay per share for a lot of their mining customers or a lot of their miners. And the miners often want it for their own business reasons.
00:06:20:23 - 00:06:41:09
Matt
It's just more convenient to deal with on their part and then pool and just didn't have the balance sheet for it pool and got a little unlucky for a while or someone did a block with only a tax. No way to know, no way to know. And then they couldn't meet their power obligations. And so they went out of business or they went bankrupt.
00:06:41:09 - 00:07:08:02
Matt
I guess they're now still in business or back in business, but now they're just a proxy for antpool. So it's all the same. So I guess they got absorbed by them or after going bankrupt. But it's it's very impractical as a small to moderate sized pool to offer fixed paper share. And I think even as a large pool, if you don't have an absolutely giant balance sheet, you can't offer fixed paper share.
00:07:08:04 - 00:07:26:17
Matt
And so it appears to have happened as all these pools basically said, our users are want fixed paper share. We can't offer a fixed paper share with our balance sheet without risking bankruptcy. And so instead, what we're going to do is just we're going to become a proxy. We're not you know, we're not really going to be a pool.
00:07:26:17 - 00:07:35:10
Matt
We're just going to be a proxy in front of another pool and we're going to, you know, be a shill organization basically.
00:07:35:12 - 00:07:41:06
Marty
At the central bank of the mining pool. Right. Ecosystem, essentially.
00:07:41:08 - 00:07:42:12
Matt
Right.
00:07:42:14 - 00:07:46:19
Marty
Matt, if we get conspiratorial here.
00:07:46:22 - 00:07:49:10
Matt
I wouldn't expect anything long.
00:07:49:13 - 00:08:16:26
Marty
I mean, we had the China mining ban in 2021. A lot of media focused media attention narratives driven from that. That's one thing that has been talked about since then. Yes, physical mining machines were forced to leave the borders of China, at least temporarily. So network hashrate fell 50 to 60%, soon recovered as miners went all around the world.
00:08:16:28 - 00:08:43:14
Marty
It's believed 20% of hashrate has settled back in China, there's a material amount of hashrate still in China, but for all intents and purposes, there was a ban on hashrate production within Chinese borders. But one thing that really hasn't been talked about throughout the years, and probably something I should have brought up because it is very noticeable, is the Chinese mining pools have still been in operation and they're at the center of what's happening.
00:08:43:14 - 00:09:12:26
Matt
Used to be bitmain to right. It continues to be. It seems like Bitmain has, with the exception of after Bitmain has kind of re created this conglomerate and this ownership of a bitcoin mining hash power in a way that we, you know, during SegWit two X we saw Bitmain's behavior and during the SegWit drama we saw kind of a clear desire from Bitmain to act as the arbiter of the Bitcoin network, right?
00:09:12:26 - 00:09:39:19
Matt
They had this very clear desire to decide what happened to Bitcoin, and I think hopefully rightfully most people or I think hopefully most people, but certainly rightfully concluded that to your God, this is like No. One. Why does someone want to be in charge of Bitcoins like this, kind of antithetical to the whole thesis of Bitcoin and now they have 40% hash rate again?
00:09:39:21 - 00:09:41:09
Marty
Yeah.
00:09:41:12 - 00:09:43:15
Matt
And you seem to be okay with this.
00:09:43:17 - 00:09:51:13
Marty
Yeah, well, it's funny because we do have a precedent of this and bitcoin's history with G hash was in 2015.
00:09:51:16 - 00:10:01:05
Matt
Right. And I think what what puts that it's a little different there is g hash asked miners to leave and some miners did leave.
00:10:01:07 - 00:10:04:23
Marty
And all the miners you know he ashes going around anymore because everybody freaked out.
00:10:04:24 - 00:10:32:11
Matt
Certainly eventually but not right away. It did take a little bit of time. But you know there's always there's often this this narrative in Bitcoin where people say, well, well, it's okay that pools are very centralized and that there's only a few pools and and whatever because mining hashrate can just switch to a new pool overnight in 5 seconds mining the miners will, you know, if the pool tries to do anything bad, miners will immediately switch to another pool.
00:10:32:13 - 00:10:53:26
Matt
And no one should worry about this because this this is how it's gonna happen. And I mean, clearly, that's obviously not the case. Right? Not only do we know that that's not the case for practical purposes, right? These mining pools and their miners are large businesses with negotiated contracts and they negotiate over the course of months. You know, you can't move overnight.
00:10:53:26 - 00:11:17:17
Matt
Often you'll have a backup. You know, you might have to contracts. You have you have a contract with some backup pool or hopefully a backup pool that we now know that many of the pools are just fronts for each other, and it's all just one pool. Anyway. But, you know, obviously, miners are going to switch overnight because they're reconfiguring all these machines and negotiating a new business contract.
00:11:17:24 - 00:11:42:14
Matt
But also, miners haven't switched in the last two weeks. The Antpool and Bitmain pool conglomerate has not materially reducing its power, has not materially lost hash power. So clearly this thesis of like, well, it's okay that, you know, pools are centralized because miners will just do the right thing for Bitcoin is bullshit.
00:11:42:17 - 00:12:14:02
Marty
Yeah. And it's gotten to a point to where the alternatives I think that's the sneaky part about what's going on with this mega pool is that it's filled with a lot of non KYC pool operators. So many miners view this as favorable. These these options is favorable because they can sign up with no KYC. And the alternatives are companies like Foundry, which require KYC.
00:12:14:05 - 00:12:26:06
Marty
And that adds a little variable to the game theory of the decisions that are being made. And as you mentioned.
00:12:26:06 - 00:12:26:21
Matt
That the friction.
00:12:26:21 - 00:12:45:17
Marty
Has become hyper industrial like since the G hash days. So it's a lot of these very you have to have boardroom decisions that need to be made. It's not people running moonshine operations that we're able to make decisions on a whim like they were back in 2015.
00:12:45:19 - 00:13:14:21
Matt
Right? Right. Yeah. And I think, you know, it's it's frustrating, too, because I think for a long time, you know, there are business reasons why miners join a pool. Obviously, it's not, you know, miners need consistent payouts or at least want consistent payouts and in many case need or they just simply will go under because they won't be able to afford their electricity one month because they got unlucky and didn't find a block.
00:13:14:23 - 00:13:45:00
Matt
So pools have to exist for some you know, for some miners to be effective. But the you know, as a technologist, as someone who works on Bitcoin software and Bitcoin protocols, you know, the technologists, we've done our job right. We've created systems for miners to be able to mine without giving up their control over transaction selection to the pool.
00:13:45:02 - 00:14:12:15
Matt
So as in the olden days, there was P2P people stopped using P2P in part because of misunderstanding I or if and rates in the UI. But and confused that for not getting paid. You know if you have a 5% working rate, people thought that that meant you lost 5% of revenue, which wasn't the case. It's you know, if you have a 5% working rate and everyone else has a 5% or third rate, everyone still gets the right revenue and it's fine.
00:14:12:18 - 00:14:31:08
Matt
So there was a little confusion in the UI. It did have some issues. Some people had a higher orphan rate which did cause you to lose revenue and it also couldn't pay out a lot of small miners. Basically, you could only use it if you were a fairly large miner once it got big. So, you know, it had some issues, but people can still do it.
00:14:31:08 - 00:14:47:21
Matt
People can go set up private P2 pools. If you're a large miner and you want to work with three other large miners and set up a pool, but none of you want to trust each other. None of you want to trust the other ones to operate the pool and manage the nodes and, you know, make sure that the payouts are correct, whatever.
00:14:47:21 - 00:15:16:10
Matt
And you could run a private feature pool completely untrusted just between the three or five or whatever miners. And it would work, no problem. Right. So that's a solution. Stratum B two is finally in beta. So the Sarai product that spiral my employer funded for many years spent hundreds of thousands of dollars paying people to work on this and to build this software suite exists.
00:15:16:15 - 00:15:38:09
Matt
It works. People can try it out now. I wouldn't call it production ready. You know, it's still got it's still early days, but we don't see miners testing it. Right. You know, if if miners if it were the case that this thesis that like miners cared deeply about bitcoin and they'll switch pools overnight if they have to, if that were true, we'd see miners running around testing stratum beta today.
00:15:38:09 - 00:16:03:07
Matt
Right. We'd see miners saying, look, we care deeply about Bitcoin. We've invested all this money in ethics. We care about Bitcoin's value and value proposition, not just the dollar value of the coin, but the long term value because, you know, Bitcoin censorship, resistance matters. Then we'd see every miner testing stratum V2, right? We'd see every miner taking three of their machines through their rigs, pointing at a demand.
00:16:03:07 - 00:16:21:16
Matt
You know, there is a production pool that runs stratum B to you can go mine on this pool called Demand Pool. I was one of the guys who was working on Stratum B two and somebody who's been around the mining space for a while went and found in a pool to offer the service to people. We'd see people doing that and we don't, right?
00:16:21:22 - 00:16:46:04
Matt
We don't see anyone caring about the issues of mining centralization from the mining side today, which is very frustrating. So it feels like, you know, technology have done the work and the vast majority of miners, certainly there are miners who care deeply about these issues and, you know, maybe aren't aware of these things or don't have time to to invest just to switch their architecture.
00:16:46:07 - 00:17:00:12
Matt
You know, maybe it's on the roadmap and just haven't gotten to it yet. But I think the vast majority of miners, it's clearly not true. The best majority of miners clearly have demonstrated very little care for the Bitcoin network.
00:17:00:15 - 00:17:25:07
Marty
Yeah, no, just thinking what a lot of the focus has been on last few years in the mining industry, particularly. It's really on the energy in a procurement side, but it's been somewhat myopic in terms of driving down your input cost and neglecting the, I mean, the back end actual health of the network.
00:17:25:09 - 00:17:46:14
Matt
Right? I mean, look, if you're a miner, you, you've got shareholders or certainly your own profit to care about. You know, you've got to care about all the things you mentioned, you know, power contracts, making sure your phone is operating efficiently, cutting expenses on employees. You know, you don't want to spend too much money on a bunch of very high priced engineers who are going to do stuff like this.
00:17:46:16 - 00:18:09:12
Matt
Totally understood. But at some point, you know, the Bitcoin network has to be important for miners. Then the long term value of Bitcoin, hopefully they care about that. And you know, this needs to rise to the top of the priority list. That needs to stop in a priority list right fucking now, because it turns out all the pools are lying.
00:18:09:15 - 00:18:46:11
Matt
Turns out half the pools are lying to their customers. Like I went around and spoke to a bunch of miners. A bunch of them did not know that their pool was actually just a proxy. For example, that they weren't mining on, you know, these these coolant pool. And it's actually just antpool now or btc.com. I mean, those were always the same owners obviously BTC dot com and Apple but you know miners just weren't aware of this And then so the fact that this isn't now at the top of the priority list to go you know test out strategy to build a private pension pool network fund brain pool.
00:18:46:12 - 00:19:18:22
Matt
There's another project where somebody is trying to revive pool and fix a lot of the issues that made too pool a little less practical to mine on. For a large business that is still early, it's not certainly not available for use yet. But, you know, I don't see any miners funding it. I don't see any miners encouraging engineers to work on it or anything like that to try to to make that an option for them so that they have, you know, a decentralized alternative to the pools that they're trusting.
00:19:18:25 - 00:19:39:00
Marty
Yeah, Well, again, pull up the pie chart again, because this is really where it gets dismaying if you just look at the options. I mean, foundry, yes, you could go to them. They're testing strategy to let's the at least the encrypted hash delivery from the individual miners to the pool.
00:19:39:02 - 00:20:03:01
Matt
Right. And that's so that's the other part, too, is it's important to recognize that when someone says they're testing stratum B, too, you have to ask, are you testing stratum B to where your end points, your customers of the pool can set the work they want to mine on, or are they just testing well, stratum B to the like, very naive protocol that's just stratum B one with some better crypto because that that doesn't help bitcoin, that helps miners.
00:20:03:01 - 00:20:14:15
Matt
You know, you get encryption, you get a little lower bandwidth usage, a little more efficient, fine, whatever. But it doesn't help Bitcoin.
00:20:14:18 - 00:20:16:03
Marty
No.
00:20:16:06 - 00:20:35:23
Matt
And so to be clear, I don't actually know whether stratum or whether foundry is testing the full work custom work selection protocol or not. I haven't spoken to them about this. I know some other trying to be you folks have, so I'm not trying to throw them under the bus. But I know, for example, brands and I don't want to throw brains under the bus, right, folks?
00:20:35:23 - 00:21:03:14
Matt
But you know, they're a small business that has to pay out. Thanks. Pay per share. And I don't know that they're really in a position to do that. And they don't support Stratum two with custom work selection. It's not something that they've built out. And I don't know why. I don't know if they have the resources for it or I don't know if they just have to join the pool boring conglomerate because it's the only way they can stay in business.
00:21:03:14 - 00:21:09:00
Matt
I don't know where they're headed that, but you know, they don't support it either. Currently it's only demand pool.
00:21:09:02 - 00:21:34:05
Marty
Yeah. And brains particularly made the switch from plan as to FPP last year after being people and for the longest time and right. The scuttlebutt around the industry is that they lost large clients because they were telling us so basically bent the new death pipes to sell them.
00:21:34:05 - 00:21:55:17
Matt
Yeah I, I would imagine so. And here again, you know, it's miners making decisions that are best for them and throw Bitcoin under the bus to some extent. Now, to be clear you can do stratum B two with custom work selection and still do fixed pay per share. That's totally an option if a pool wants to offer that.
00:21:55:19 - 00:22:22:08
Matt
But for the most part, this demand of fixed pay per share just means that there can only be one pool or two pools, or certainly one pool insurance service, because you just have to have your demanding that your pool has such a deep balance sheet that no one can really do it. Certainly none of these small pools that are just pool businesses, you know, you have to have another business on the side like Bitmain, where you have a very deep balance sheet.
00:22:22:10 - 00:22:49:06
Marty
Yeah. Now the pie chart is really disconcerting and that's again like what options in the miners have right now? There's few and far between. So it's begs the question, is there a need for like a skin shedding here? Is the mining pool industry like a snake that needs to shed its skin and have new new entrants pop up like demand, like ocean?
00:22:49:07 - 00:23:30:26
Matt
Totally. You know, I mean, if if it's a question of miners actually doing it, you know, again, we've got to get miners have to be willing to take the take a little bit of pain in the short term, not, you know, average revenue pain, but maybe s from demand or ocean. You know, maybe it's going to a pool and saying, look, you ship stratum B to with customer collection in six months or we walk and be ready to switch to demand you know maybe demand get some hash power from that and plants or whatever so that, you know, you still get the same average revenue but a little less consistent.
00:23:30:28 - 00:23:40:27
Matt
And you know, miners at some point need to be willing to do some of these things. So the Bitcoin Bitcoin operates well. So the Bitcoin is actually worth something.
00:23:40:29 - 00:24:20:04
Marty
Well, that's the most important part is I think we need to strike the fear of God into the mining industry where there's a meme and it's got some validity to it. The miners are somewhat of the caveman in the industry. Just plug your machine, pay their electricity bill, get bitcoin out the other end, don't really think much. Obviously that's that's not completely true, but I think it's directionally correct that there's a lot of miners, particularly that have come in in the space the last few years, just see this arbitrage opportunity between the price to produce Bitcoin and the price that is trading it at any given point in time.
00:24:20:06 - 00:24:51:03
Marty
But there's a lot of upfront capital that goes into that deposits for electricity, content contracts, deposits for A-6, paying for basic delivery, all the infrastructure around it, the actual housing of the miners. So there's a lot of capital at stake. And I think that's right. What miners need to understand is that all that sunk cost capital that they put into their operations, billions, tens of billions of dollars in aggregate is at risk if this problem is solved.
00:24:51:05 - 00:25:33:18
Matt
Yeah, I mean, you know, whether it's know that happens one way or another, eventually, probably not. Probably not soon. You know, there's like three different ways or four different ways that that capital could be a problem, that that investment could be becoming problematic investment if this doesn't get fixed, either Bitcoin gets censored, you know, whether it's regulatory decision or whether it's just the decision of of McCree, the current CEO of Bitmain or whoever the next CEO is, just decides they're going to start censoring Bitcoin, then I think clearly the Bitcoin value would plummet and the miners would be left holding.
00:25:33:18 - 00:26:05:26
Matt
Nothing could live with a huge investment in bitcoin that's now worthless or, you know, maybe the bitcoin community wakes up, maybe the Bitcoin community says, Look, this is bullshit. The miners, you know, we have now, you know, almost 15 years of experience with Bitcoin For the vast majority of that, at least more than a decade, we've had pools and the pools have always been fairly centralized and we have the technology to fix that.
00:26:05:29 - 00:26:31:00
Matt
But miners haven't adopted it. So we need to fire the miners and we need to make a new crop of miners who's going to maybe adopt technologies that are available and do something better for Bitcoin. So maybe the proof of work function changes. You know, maybe all these miners suddenly have a huge pile of basics that they have after replace because the proof of work function change, just to specifically force all of them to go bankrupt.
00:26:31:02 - 00:26:33:24
Marty
Okay, Pull out the nuclear. You know.
00:26:33:25 - 00:26:53:02
Matt
I like, you know, eventually something is going to get right. If if this doesn't change and doesn't change in the next 5 to 10 years, something is going to give. And it's probably just one of those two.
00:26:53:04 - 00:27:03:10
Marty
Yeah, I haven't heard the hash function change or threatened since the fourth quarter when Luke Dasher was putting it forth and yeah.
00:27:03:12 - 00:27:45:13
Matt
Look, I mean it's, you know, when we're talking about a blockchain fork, we're really talking about two things that are going to be valued differently. Miners don't you know, when we were talking about the fork wars and Segment two X and all these things, the hash function wasn't where the miners ended up. Mining wasn't really a determining factor because the market was going to decide, the market was going to pick the fork that they thought was more valuable, and then that the hackers or the miners were and they could mine whatever they wanted, but they were only going to get paid as much if they were mining the one that the market thought was more
00:27:45:13 - 00:28:17:19
Matt
valuable. So, you know, they were kind of along for the ride and so threatening them then wasn't maybe all that interesting here. It's a clear case of just the miners aren't doing the thing that is good for the network. They're doing something that is in many ways not good for the network. And, you know, if it were just like, well, the incentives are off and there's no way for them to to do something that's better for the network while still having a sustainable business.
00:28:17:19 - 00:28:48:11
Matt
And a good business, then would be one thing, like we should fix the incentives. But here, that's not the case here. You know, the technologists have done their job as there is only a better fine will be really soon. But the miners haven't you know, the miners haven't started testing these things. The miners haven't explored future pool and the miners haven't been you know, I've seen zero miners involved in discussions around great pool zero, right.
00:28:48:13 - 00:29:06:26
Matt
So, you know, the miners haven't moved towards these things. And so here clearly there's a case of just the miners aren't doing the thing they need to do, even though, you know, the incentives are neutral, there's no material revenue loss. Maybe it's a little less consistent because maybe this, you know, if you switched a bit to pool, might be appealing or something.
00:29:06:26 - 00:29:30:10
Matt
But yeah, if you get enough hash power and averages out pretty well, you'll be all right. So, yeah, I mean, I don't know what it seems to me like the Bitcoin network is much better off changing the proof of work and bankrupting the existing crop of miners than waiting until bitcoin gets centered.
00:29:30:12 - 00:29:35:03
Marty
Yeah, that's going to cause a lot of breakdown. And I don't.
00:29:35:03 - 00:29:36:14
Matt
Think that's a shocker. You?
00:29:36:16 - 00:29:37:24
Marty
No. Now I'm thinking of like.
00:29:37:26 - 00:29:41:00
Matt
The short term thing. It's very painful, but.
00:29:41:03 - 00:29:53:01
Marty
Yeah, I'm putting on my tinfoil hat now because think of how ingrained mining operations have become. The grid systems, off grid systems. It's a big industry now. It's.
00:29:53:03 - 00:29:54:17
Matt
It's yeah.
00:29:54:19 - 00:30:22:28
Marty
It's a massive industry. And the vested interest in the ancillary services beyond Bitcoin mining or the precarious situation that something like changing the the hash function would put them in is like pretty heavy to think about. Like you talk about like grids, instability potential in Texas. That's what.
00:30:22:28 - 00:30:40:29
Matt
I mean. Well, look, if you change the hash function, you give people time and they can buy, you know, the current miners may go bankrupt, but somebody else will buy a new A6 and build similar systems. So you're right, be painful. But hopefully it wouldn't have to be that painful.
00:30:41:02 - 00:31:19:13
Marty
No, it would be painful. It would be a logistical nightmare that I mean, that begs the question, too. I mean, you've been getting at it, beating around the bush like mining pools are notoriously terrible businesses that need ancillary added value services to actually be profitable businesses. And again, going back to the snake, shedding its skin analogy, like, ah, the current crop of pool operators, the people that should actually be operating pools, should it be a conglomerate of not a conglomerate, but should it be like individual energy companies run a pool?
00:31:19:15 - 00:31:21:27
Marty
Should should it be an exchange?
00:31:22:04 - 00:31:45:19
Matt
Somebody and yeah, well, I mean, you know, it's as you mentioned, it's not a good business in many cases. So, you know, an exchange or an existing business that wants to optimize for returns is not necessarily going to invest in running a pool. So we saw this with with finance or finance runs a pool, it's just a proxy for for and pool.
00:31:45:23 - 00:32:06:22
Matt
And we've known that for a while. I think they said that publicly. But, you know, now we know that even more pools are actually just proxies for pool. And so, you know, when you see something like that, often it's just contracted out. So, you know, maybe the answer is more that large miners get together and run a private people pool and stuff.
00:32:06:25 - 00:32:33:22
Matt
You know, maybe they create their own, you know, mutually untrusted pool where they all join in. They all, you know, operate free to pool nodes. The software exists. You don't have to fork it and you just got to run it. You know, it's been shipping to pool was popular in 2012, 2013. You know, it's been around forever. And, you know, maybe it should just be a side part of the business of running a miner.
00:32:33:22 - 00:32:52:17
Matt
You know, maybe you just need to to hire one guy or not even one guy. You know, maybe just your current ops people are capable of running a pool on the side and the business folks run around and join forces with a few other miners to to create, you know, these private mining pools.
00:32:52:19 - 00:32:53:25
Marty
Yeah.
00:32:53:28 - 00:32:55:17
Matt
Yeah. Maybe we should have mining pools.
00:32:55:24 - 00:33:00:13
Marty
Have you personally talked to any of the bigger miners about this or.
00:33:00:16 - 00:33:33:03
Matt
Not this idea specifically? You know, I think that is a bigger shift in the industry. And I don't know how many miners are ready for that. You know, I think getting to be too over the line is a little bit of an easier sell because Stratum meta is basically the existing business. You know, you're still working with a mining pool, you're still doing the same, same thing you do now, but you just run a little different software.
00:33:33:05 - 00:34:02:00
Matt
Um, and so I think that's I certainly thought that was an easier sell. So far we haven't really gotten much in the way of miners actually testing this stuff. You know, the software exists and developers want testing, want people to to try stuff out. But so far it hasn't been. Uh, yeah, so far it hasn't been a big a big thing.
00:34:02:03 - 00:34:12:20
Marty
I think I remember it'll be 2018 or 2019 meeting in New York, talking about try to be to the first time at a vegan restaurant. Midtown. Yeah. And it's been a while.
00:34:12:21 - 00:34:41:20
Matt
It's an old idea, you know? It's. It's an old idea. No, I mean, the idea itself predates try to me to previous iterations of the protocol. Sadly, strategy too as a spec, you know, we spiral struggled a little bit to find people to fund to work on it. You know it took a while for us. We were running around begging anyone, you know, hey, if you want to work on this, the software engineer will pay you and please work on it.
00:34:41:20 - 00:35:09:21
Matt
We struggled for a long time to find anyone to do that. We eventually did. It's now a open source project that that is available in beta and there's a handful of people working on it. We still fund, I think one or two of them. So so it took a while, but it is finally there. And now it's time for miners to, you know, do their damn jobs and start testing it and start working towards it.
00:35:09:24 - 00:35:32:01
Marty
What would you say to people who hear this and say he's shilling his own bags, he's been working on to be to for the better part of a decade. He wants to see his baby get into the world. This is something that to worry about. We have somebody with a bias putting forth a solution they want to see in the world.
00:35:32:03 - 00:35:54:13
Matt
Yeah, I mean, again, I don't really care if it's Stratum B two or Private Picchu pools or brain pool. I didn't. I worked on the design of this try to be true protocol. I haven't actually worked at all on the software I'm shilling other people's software for the Saraya the stratum reference implementation and then some other people people built.
00:35:54:16 - 00:36:41:23
Matt
But yeah, I mean, again, I don't really care how we get there. I care that the transaction selection, the selection of which transactions into the Bitcoin blockchain becomes decentralized because today it's not. And you know, I hope that and I think Bitcoin only has value if it is, you know, I think as our I think strategy too is the most likely way to get there because I think it continues the existing business models that people are used to and people are comfortable with and you know, you can continue to use a pool, you know, if if we switch to a bunch of private P tuple instances, then, you know, variance is going to be higher
00:36:41:23 - 00:37:01:14
Matt
and people might not like that. But with Shadow Me too, you're variance and have to be higher. Variance can be the same. You can still do fixed paper share as long as your pool has a deep balance sheet, but in theory you can still do it and so I think it's the most likely. But I, I don't know if other if something else gets adopted.
00:37:01:14 - 00:37:19:20
Matt
I'm very happy to see that. But, you know, at the end of the day, right now, nearly every, uh, proof of stake system is substantially more decentralized than Bitcoin. And I don't know why Bitcoiners are okay with that. Yeah.
00:37:19:23 - 00:37:28:09
Marty
Do you think there's a perception that it's a big lift to even test this and then eventually implement it? And if so, is that a misconception?
00:37:28:09 - 00:37:51:29
Matt
Maybe, maybe. I don't know that I've spoken to enough miners to an understanding, you know, I know, again, most miners don't necessarily have a big tech stuff. They don't have a bunch of engineers who are going to go, you know, implement. They do many miners have some, uh, software engineers because they build their own mining for a management in-house.
00:37:52:01 - 00:38:18:25
Matt
Some don't. Some use third parties, but it shouldn't be a huge lift here. I mean, we're talking, you know, either one virtual machine in the cloud or one little you know, you buy the little intel nuts, the little, you know, pieces that are like this big. They're like Raspberry Pi, but they're actually powerful. They're not garbage. You buy one of those and you run some open source software on it is packages.
00:38:18:25 - 00:38:35:02
Matt
You just download the binary and run it and then you can figure out you point into to demand pool. I don't know if you even need an account. I think you probably need make help, but you open an account with demand pool. You know, you point your miners at it and you run bitcoin core and you know it's not zero.
00:38:35:02 - 00:38:56:01
Matt
It's certainly not a two minute project. If you're not an engineer, you don't you know, you're not kind of used to these kinds of set ups, but it's also not a one day project. It's our project, you know, tested outright with a few of your major mining rigs. You know, take a few of them off the shelf, find them to your point, empty your machine, Join the Discord.
00:38:56:01 - 00:39:18:21
Matt
There's a bunch of engineers there who would be happy to do as much customer support as you need to get going. Yeah, it shouldn't be too hard. I can see why people might be intimidated a little bit, but it's time to get off zero. It's time to slide this in to people's business plans for the next six months.
00:39:18:21 - 00:39:34:02
Matt
You know, if you're a miner and you you know, you got to figure out when you have time to do this, but, you know, over the next six months, you should be able to make some time to at least get this tested, can go and get a few of your devices on on demand pool in, test it out.
00:39:34:05 - 00:39:36:09
Matt
Um, yeah.
00:39:36:12 - 00:40:13:00
Marty
Yeah, yeah it is it's scary to think about and I do think, um, to put my miner hat on. I think again, people been so myopically, myopically focused on the cost side of things, particularly on the energy side that they've just overlooked this. And again, it snuck up. I don't think people understood that. I don't think anybody understood that there was this large proxy pool that people or this large foxing until until a couple of weeks ago.
00:40:13:02 - 00:40:33:02
Matt
Right. Which is all the more reason miners should be freaking out. Like if your pool is lying to your face about who your counterparty is, why you don't want to do business with somebody who's going to lie to you about who your counterparty is. That's not you know, if your counterparty is secretly bitmain and your pools not willing to tell you that you don't want to do business with them.
00:40:33:04 - 00:40:54:21
Marty
Yeah. No, no. Again, conspiratorial like was this China's was it a smoke and mirrors campaign smoke? We're banning mining um tickell they actually six out and then control the pools to censor bitcoin eventually could be and then another thing that bitmain.
00:40:54:23 - 00:41:26:27
Matt
To a conspiratorial in the Chinese government since we know bitmain has a long history of fighting a desire to control Bitcoin and and a a deep misunderstanding of why this is bad. You know, certainly a big part of that was Jihan. When Jihan was CEO is not there anymore. You're not supposedly not there anymore. And so, you know, maybe that has improved, but it's been historically that's been a part of the company.
00:41:26:27 - 00:41:53:01
Matt
And part of Jon's whole M.O. is he wanted to own Bitcoin by owning the pool that everyone mined on and having everyone, you know, bow down to him and forcing everyone to use a pool, You know, basically, if you want the new, uh, if you want the new ethics, you've got to use our pool and you've got to let us have, uh, you know, control Bitcoin or use one of our proxy pools or one of the pools.
00:41:53:01 - 00:42:07:21
Matt
We, you know, at the time, I don't think that we're necessarily proxies, although I don't know that anyone checked at the time. But, you know, they certainly had a number of pools that they were, let's say, very, very chummy with.
00:42:07:24 - 00:42:30:23
Marty
Yeah, not even Chia now. A bit, dear. They're still arm's length connection to Bitmain. Pretty sure they're supplying all there's machines. So. So a close relationship, I'm sure. Yeah. It's, it's not good.
00:42:30:26 - 00:42:58:04
Matt
No it's not. But luckily again luckily, you know, the technologists have done their job here and miners have options or at least one option right now. And hopefully with, uh, eventually brain pool. You know, I don't know where brain pool is in terms of shipping, but, you know, hopefully that's an option too for folks. And yeah, so miners will have options and miners should be should be exploring those options.
00:42:58:04 - 00:43:14:12
Matt
Now, you know, that needs to be on the roadmap in the very short term because we're in such a bad place right now. And I you know, I think the Bitcoin community needs to start thinking about what the long term plan is here if miners don't start taking these options.
00:43:14:14 - 00:43:22:00
Marty
Yeah. What hash function would you would you prefer to use?
00:43:22:02 - 00:43:39:03
Matt
Honestly, just leave short to five six, but use a 64 bit timestamp. Let's just fix the timestamp issue. Keep short 256. Who cares? And well yeah, we'll just break all the miners and replace them with do want.
00:43:39:06 - 00:44:02:03
Marty
That would be it for what is it. Murphy's Law. Anything that can go wrong will go wrong. That would be just sort of a pure masochist masochistic, uh, just infinitely curious to see what the worst case scenario would be like and how it would play out. That would be the be clear. You don't want it to get to that point.
00:44:02:03 - 00:44:27:02
Marty
It freaks. But as Matt puts forth, like if things don't change, it could very well get to that point. And for historical context, again, the last time this was discussed, it's well, it's the hash function changing of the hash function is known as the nuclear option, where it's like a last resort. Miners are fucking around. You hit the button, you change the house function.
00:44:27:05 - 00:44:29:11
Marty
Yeah, You induce a little chaos.
00:44:29:11 - 00:44:39:14
Matt
It is it is hopefully the last resort. But, you know, again, I don't I don't understand why anyone can be bullish on Bitcoin right now.
00:44:39:17 - 00:44:40:13
Marty
The ETFs are here.
00:44:40:13 - 00:44:45:00
Matt
Matt Yeah, prices going up, but.
00:44:45:02 - 00:44:47:00
Marty
The BRC tokens.
00:44:47:03 - 00:45:05:22
Matt
Price is going up. But I had been going up. But like I don't understand, you know, the if you're in this for just the price, what are you doing? You know, and even if you are in this for just the price, where do you think the price comes from? The price is only goes up because people view bitcoin as fuck you money.
00:45:05:24 - 00:45:10:18
Matt
If miners consents or the the blockchain, then bitcoin is not fuck you money.
00:45:10:20 - 00:45:15:16
Marty
Yeah, I completely agree. And to be clear, I was being facetious.
00:45:15:18 - 00:45:17:14
Matt
The know.
00:45:17:16 - 00:45:40:17
Marty
The uh. Yeah the number go up amnesia. Mark Goodwin used that term for the first time on the show last week I thought was a very good term, but it is the thing that number go up does, it induces amnesia where people don't care about the properties that make Bitcoin valuable in the first place. They just care about the dollar value and forget about things that are important.
00:45:40:19 - 00:45:44:00
Matt
And All right. Yeah.
00:45:44:03 - 00:45:52:18
Marty
We need a slogan. Any good? Uh, a good attempt to drive the slogan fire. The miners.
00:45:52:20 - 00:46:01:13
Matt
Are like, Yeah, light a fire under. The miners are threatening to fire the miners.
00:46:01:15 - 00:46:25:29
Marty
The, uh, I was going to say it's a bit too uncouth to put on there, but that's the thing. These Chinese ports have a lot of control, and historically, they've been very opaque and hard to deal with, hard to get in control of, unless you're Chinese. Um, so that's the interesting thing. Like, I find it hard to believe that any of the Chinese mining pools, particularly those directly controlled by Bitmain.
00:46:25:29 - 00:46:33:00
Marty
So Bitcoin an ampoule would ever willingly adopt something like 72.
00:46:33:02 - 00:46:52:16
Matt
Yeah, maybe not. And you know, and if, if 20% of the network hash power is gone, these legacy pools. Okay, well, you know, that's what it is. But if you know, 60% of the network hash power is on these legacy pools, then maybe Bitcoin is going to have power.
00:46:52:18 - 00:47:25:06
Marty
So do you think this could be solved in a legal way in terms of the way these pools are actually constructed? From a legal perspective, I've heard the idea floated where you create this pool that would be similar to Antpool in these regards, but it's a nonprofit with very specific with a very specific mandate, which is to, uh, gather transactions that get the highest fee within a block and then broadcast the transaction.
00:47:25:07 - 00:47:30:03
Marty
Then you could proxy pool into that and do things on top of it.
00:47:30:06 - 00:47:50:08
Matt
You know, you're still you're still subject to whatever jurisdiction that pool is based on. So now we have this one big mega pool based in the US and the US government. You know, in four years or in eight years or in 12 years or in 16 years, we elect somebody who decides they want to censor Bitcoin. And the US government says Bitcoin is now censored.
00:47:50:11 - 00:48:04:16
Matt
And so it is. Yeah, you know, as long as as long as it's the case that we have these large single entities that are responsible for these things, there's yeah, you know, we're, we're setting ourselves up for trouble.
00:48:04:18 - 00:48:34:00
Marty
You know, I wonder, are some of these larger miners just, I mean that's a shame of the large scale miners is most of them are public. And so they're beholden to quarterly filings and shareholder updates and they can't really stomach the variance risk. I think that's why brains suffered the big hashrate leak when they were people. And this is that publicly traded miners, it can stomach the variance readily.
00:48:34:02 - 00:49:01:16
Matt
Yeah. I mean I get I get not stomaching variance but people in this is not super high variance it's only high variance when your pool is particularly small right. With brains what is brains wasn't a very large pool. So they ended up with high variance. But you know, you can have a much larger pool of people on earth and sun.
00:49:01:18 - 00:49:07:15
Marty
Sun probably died. That's that's calling in from his phone.
00:49:07:17 - 00:49:28:06
Matt
You know then miners in those cases we see. So even when you know, even when see these big pools, even you see these big pools that have very little variance, you still see miners demanding a few ups because it still just seems a little better for them right. And it is really detrimental to bitcoin's detrimental to their pools.
00:49:28:08 - 00:49:50:15
Marty
Yeah, we lost you there for a few seconds, but I think I cracked what you're. What you're saying. Yeah. Um, yeah, it's going to be hard problem to solve again because you have a lot of capital sunk. It sunk into this, a lot of business relationships, a lot of tough conversations that are to need to be had by large miners in the pools that they put their hash.
00:49:50:15 - 00:50:12:13
Matt
Yeah, I mean, it is a tough problem to solve, but also not a tough problem to solve. It's it's it's tough in the sense that, like there's a lot of what people do now and they want to keep doing what they do now, but also not tough in that try to to gives you a release valve. You know, you just change the software you're running and you can keep doing the same thing you were already doing.
00:50:12:16 - 00:50:34:17
Matt
You can keep the same power structure, you can keep the same, you know, all the same contracts you have in place with your pools. You keep the same pools and all you do is you change the software and bitcoin's decentralized again, right? And so that's the beauty of something like strategy to when you do customer selection is nothing really has to change.
00:50:34:19 - 00:50:38:12
Matt
But, you know, miners just have to change software.
00:50:38:14 - 00:50:54:18
Marty
Yeah, Yeah. Again, I'm trying to think of how to even start this kind of or I mean, this is a way to start the conversation. But actually drive tried change.
00:50:54:20 - 00:51:04:00
Matt
Well, you said in this podcast you tell them that we're going to change the fucking proof of work out from under them, so they better fucking get off their ass and do something about it.
00:51:04:02 - 00:51:21:13
Marty
Yeah, I think the logistics that would go into that, like there would have to be like a tangible alternative in terms of like basics could actually acquire and plug in once the proof of work function has been changed. Like do they exist? Yeah.
00:51:21:16 - 00:51:49:17
Matt
Yeah. I mean, you know, we can get there. You know this, if miners really aren't going to do anything, then we can absolutely figure out the logistics like the Bitcoin network. You know, Bitcoiners need a decentralized system. That's why all the bitcoiners are here. And if the miners can't, you know, can't provide a decentralized it's those miners have no interest in providing a decentralized system then bitcoin is can figure out the logistics.
00:51:49:17 - 00:52:02:10
Matt
You know there'll be a lot of value in being the first one with an ace for a new proof of work function. And so I'm sure people would build it. Sure people would buy it, I'm sure people would plug it in.
00:52:02:12 - 00:52:15:22
Marty
Yeah. Then you have another Yeah, this is a shit show isn't have a problem there. If somebody corners the market, it loses six eight chances and it's just like centralized when you relaunch.
00:52:15:25 - 00:52:24:25
Matt
Yeah. I mean you know, it can't be worse than today, right? 50% in one pool can't be a hell of a lot worse.
00:52:24:27 - 00:52:37:11
Marty
You know, before stratum v2, like what option miners have now to help reduce this problem. I mean, point your hash at water. Yeah.
00:52:37:11 - 00:53:14:11
Matt
I mean get ons. Yeah. Get off one of these bitmain proxy pools, you know, Get off. Yeah. Really? That, you know, foundry's not great either, but yeah, look at that. You know, just care about where you're at this point. It just care, you know, if, if any material number of miners gets off these bitmain proxy pools and off after pool or after pull off foundry, then suddenly we'll have another big pool.
00:53:14:13 - 00:53:29:00
Matt
You know, it doesn't take it takes a bunch of people getting together if you're really you know, if you're a miner and you're saying, you know, all right, you know, maybe I'm going to test Stratum B two over the next 6 to 12 months is going to take me a while to get to it. What can I do now?
00:53:29:00 - 00:53:47:08
Matt
You know, I'm currently mining on one of these pools that was lying to me. That's actually a proxy for a BITMAIN proxy for Antpool. What do I do? Well, you go to a bunch of other miners say, Hey, look, here's a problem. We need to do something about it collectively. Let's all switch to, you know, demand pool or something.
00:53:47:13 - 00:54:10:06
Matt
The demand also also offers run of B1 endpoints. You know, you can go I, you know, use demand as an example is I'm sure there's a handful of other small pools that that aren't proxy pools. Um, I'm not super up on the list of all the small pools in Bitcoin that don't have mature power, but you know, you pick a new winner like it doesn't, you know, a bunch of miners get together and say, that's the one we're going to use.
00:54:10:06 - 00:54:17:12
Matt
You all switched to it. And overnight there's a new big pool and you don't suffer any increase in variance.
00:54:17:14 - 00:54:25:06
Marty
No, it's a shame. Like one of the big alternatives right now would be ocean. I mean, it's not big, but one of the alternatives, ocean Pool.
00:54:25:08 - 00:54:27:17
Matt
Yeah. Ocean is another option.
00:54:27:19 - 00:54:45:14
Marty
Now, but people won't go to that because they're not mining the most profitable blocks. So. That's right. Yeah. You got Uncle Tinfoil Marty, right now because it's like, is this all or does B or C 20 like a way to lock people into these pools? They're more willing to facilitate ocean.
00:54:45:14 - 00:55:05:26
Matt
The only ocean is the only miner that's not willing to include that stuff. So, you know, any other pool or an ocean is the only pool any other pool will do, Right. Just pick any other pool for the few who are willing to to suffer a little less income for, you know, some kind of philosophical argument in the ocean.
00:55:05:26 - 00:55:11:09
Matt
Fine. You know, please just don't use don't use one of these bitmain proxy pools.
00:55:11:12 - 00:55:29:20
Marty
Yeah. Yeah. Going back to gee, I mean, it is astonishing how complacent people have gotten and going back to, gosh, I mean, people Peter Todd sent out a tweet and people left that pool within hours.
00:55:29:22 - 00:55:56:06
Matt
Yeah, a lot of it lost a lot of hashrate pretty quick. You know, it still had a lot of hashrate for a while, but it did eventually, you know, lose a lot of hashrate. It did kind of collapse, I think Even then I thought, you know, I distinctly remember a number of conversations, even all the way back then where people were kind of saying, look, miners are not as in it for Bitcoin.
00:55:56:06 - 00:56:19:29
Matt
They're not as willing to change pools when there's a big problem as they should be. And this is problematic. Like even back then when it took, you know, a month or whatever for enough hash rate to really you know, hash had to tell people they weren't accepting new users. You know, it really it took a lot of effort to get people to stop using so much cash.
00:56:20:02 - 00:56:45:00
Matt
But they did they did collapse and they didn't collapse after, you know, a few months. They lost a lot of hash power pretty quick. But even then it was a problem. And today we just see no movement at all. Like, oh, yeah, there's my pool. And you know, this business that is core to my business that is handling all of the finances, all of the money that I'm making is coming via this third party company.
00:56:45:02 - 00:56:53:07
Matt
And it turns out it was lying to me. And people are kind of okay with that. Yeah. And that's right.
00:56:53:10 - 00:57:29:09
Marty
Now it's going back to so you know if to pool and pull BTC dot com brains the foundry. Yeah I mean that's that's what I'm trying to grok like how much of the A6 that are plugged in around the world are owned by Chinese companies or individuals who I mean, just being in the industry is the way the Chinese where they point their hashrate at Chinese mining pools and do it.
00:57:29:12 - 00:58:07:19
Matt
And it's a shame and it's a shame that, you know, pooling went under a pool and made a big dent in that market was a third party. And then they went bankrupt and got apparently acquired, or at least in some way, shape or form ended up being a proxy pool for and pool. So it's a shame that all these folks were demanding fixed pay per share when it's just not sustainable unless you are more than a pool as a business, unless you have a lot more going on in your business because you need that to keep balance sheet.
00:58:07:22 - 00:58:26:22
Marty
Yeah, kind of thing. Maybe get a K and C minor book club. Um, you have Lincoln Lincoln Pool, which is probably a good option for people as well. It's very small, but yeah, miners wake up, we're going to fire you.
00:58:26:26 - 00:58:34:28
Matt
You know, the miners. You know, we need we need a big mining conference, a big meeting of all the miners to come together, sit in a room and pick a new winner.
00:58:35:01 - 00:58:39:05
Marty
Maybe Hong Kong at least, and have maybe we come to an agreement in Hong Kong or something like that.
00:58:39:08 - 00:58:47:05
Matt
Clearly in Austin, because we're all the miners are somewhere in West Texas. We'll pick a think around in town somewhere.
00:58:47:07 - 00:58:53:03
Marty
Yeah. Uh, these are messy problems. These are the problems.
00:58:53:06 - 00:59:00:18
Matt
And it's hard in the short term. In the long term, miners just need to start testing strong. Be, too. I need to start moving to these other solutions.
00:59:00:20 - 00:59:08:22
Marty
Yeah, I'm telling you, it's going to get released and everybody's gonna be like, he's fearmongering because he once tried to be too. Um, he's incentivized.
00:59:08:22 - 00:59:14:13
Matt
Well, you know, they can keep saying that right up until Bitcoin changes. Proof of work and then they're going to be real.
00:59:14:13 - 00:59:40:19
Marty
Said Yeah, yeah. Hmm. Yeah. There's been a lot of fuckery on the, uh, the mining pools that not only with this centralization of block production and templating, but yeah, like with the, with the out of band transactions, I mean even outside of the Chinese mining pools you have that stuff fuckery. It's a business model but it is a new interesting variable within the mining industry.
00:59:40:19 - 00:59:49:08
Marty
Slipstream from Marathon with product spaces, transaction accelerator, which I think is preferable to.
00:59:49:08 - 01:00:16:05
Matt
So far this has happened. So far those things haven't real substantial revenue, some revenue, some real revenue certainly, but not huge revenue. You know, I'm hopeful that they don't ever mint huge revenue. We've seen similar things in the past that haven't minted huge revenue. But we'll see. And I think, you know, at some point Bitcoin core is going to be forced to make really policy a little more relaxing.
01:00:16:11 - 01:00:46:23
Matt
Glencore tends to be very relaxed. So, you know, most of the relay policy that they do enforce is, you know, if you have a big transaction, it becomes actually computationally difficult to calculate an optimal block. So Bitcoin core prefers small transactions because that's the only way they can build up an optimal block template. But you know, these things will will have to change as those demand from users changes because, you know, Bitcoin core will have to create, you know, has to create good block templates.
01:00:46:23 - 01:01:03:02
Matt
There's no other way around it. So we'll see what happens there. But I'm cautiously optimistic that none of these more fancy transaction construction things will ever be a huge part of mining revenue in Bitcoin.
01:01:03:04 - 01:01:14:18
Marty
And that's good to know. All right. Everybody needs to go test stratum strategy to think it will be in beta for, what, six more months, maybe longer?
01:01:14:22 - 01:01:34:25
Matt
Well, it depends on when people get around to testing it. You know, if nobody tested it in beta forever, if people actually started in the hash power at it and testing it and saying, I like that I can select my own custom work, I can mine on demand pool. And I found, you know, how many shares then it'll be out of beta in a month, you know, so it's it's a question of people using it.
01:01:34:27 - 01:01:38:16
Marty
Should we publicly shame some people right now.
01:01:38:19 - 01:01:42:05
Matt
If you have people you want to share. Sounds good to me.
01:01:42:08 - 01:01:47:15
Marty
I've got commit commit. Let's it out. Right. Let's test it out.
01:01:47:15 - 01:01:51:24
Matt
Yeah yeah you know, get up zero cathedra.
01:01:51:27 - 01:02:27:22
Marty
Sit on the board. I'll bring it up. I cathedra. All right, test it. It's I think that's not a problem but strategy too. I think it's taken so long and maybe there's an error of is it really here because it's been talked about for so long like yeah. Is this is bullshit. Sort of like foundry implement. That's the other thing to foundries like we have to strategy to live and it's like yeah, that's just the, the cryptographic nature of sending hashes to the pool.
01:02:27:25 - 01:02:33:28
Matt
Not really say yeah yeah. And, and to be clear, I'm not actually 100% sure where they are on that.
01:02:33:28 - 01:02:41:27
Marty
So that's, that's right. And then brains also announce that they have it in brains os at least maybe it was brains. Yeah.
01:02:41:27 - 01:02:52:07
Matt
But that is, that is only the, the standard construction for them. That's not the, the custom work collection version of. Yeah.
01:02:52:09 - 01:03:04:29
Marty
Another for Bitmain. They just announced that or they even announce that they just released their latest firmware which makes it impossible to backdoor. So that's something like brains OS right. Or other third party more long term.
01:03:05:01 - 01:03:10:09
Matt
The next next version they're going to tie it to their pools can only mine on their pools, you know.
01:03:10:11 - 01:03:13:00
Marty
You think so.
01:03:13:02 - 01:03:22:08
Matt
That would I mean that's always been there that's always been their go to you know we want more users on our pools so that they can extract fees, eventually lock people in.
01:03:22:10 - 01:03:40:13
Marty
Yeah, that would be interesting. That would be a misstep we give. Luckily, uh, within your corporate umbrella is good announcement to see today. Yeah. Yeah. The block mining.
01:03:40:16 - 01:03:42:05
Matt
Hubs, three nanometer tip.
01:03:42:06 - 01:04:05:16
Marty
Oh that's good. Me that we got audio link audio line as well obviously it micro beauty from partial towards I love their machines run them personally Intel may be back in the game Yeah but men need to check and it is weird because bitmain you know the mining industry would not be as robust as it is without Bitmain.
01:04:05:16 - 01:04:12:08
Marty
Historically, both bitmain has been extremely antagonistic and scummy in a lot of ways.
01:04:12:10 - 01:04:13:22
Matt
Yeah.
01:04:13:25 - 01:04:26:18
Marty
All right. We do it every episode that we record. Uh, you were most optimistic two years ago, and I seem less optimistic. Uh, percentage of bitcoin succeeds right now.
01:04:26:21 - 01:04:48:03
Matt
Three, three, four, three. I really think. I don't see, you know, miners aren't getting off zero. And like you mentioned, there's a lot of miners who, you know, there's a lot of Western miners in the US who might get off zero here and might start testing and might start helping out and might start mining astronomy, too. But there's a lot of miners who it's going to take a lot of work to reach.
01:04:48:05 - 01:05:07:19
Matt
And, you know, we got to get of zero. We got to get some of these bigger miners in the west get moving. But I don't know. I don't know what's going to happen to the long tail and I don't know what's going to happen to a lot of hash power in Kazakhstan, China or whatever. Um, we've got a long way to go to make Bitcoin decentralized.
01:05:07:22 - 01:05:22:08
Marty
And is there a forcing function once certain V2 is adopted by a certain percentage of the network, where becomes, uh, not uneconomical but less economical to run. Try to be one.
01:05:22:10 - 01:05:42:17
Matt
Maybe not really, no. I mean, it doesn't change a lot about the economics. Um, you know, I would strongly encourage ISP's out there to go start stealing hash power M because Stratum B one is insecure and your ISP could be siphoning. So I strongly encourage that if you're an ISP and you're in Kazakhstan, go steal some hash power, make some free money.
01:05:42:19 - 01:05:44:17
Matt
But why not?
01:05:44:20 - 01:05:52:14
Marty
Okay, maybe that's why we need to. Attacks from the ISP is to force decentralization into money there. All right. If I was.
01:05:52:17 - 01:06:02:12
Matt
Holding in bankrupt all the fixed paper. Sure. Pools going on some blocks go bankrupt. The paper share pool.
01:06:02:14 - 01:06:14:13
Marty
And Matt came on and shows violent. Today we're going to block the told the ISP's are going to attack and hashrate Jack we're going to change the hash function we're going to find miners.
01:06:14:15 - 01:06:16:11
Matt
Yeah.
01:06:16:13 - 01:06:24:06
Marty
All right well I knew this was going to be this type of episode, you and EPMD last week had a feeling.
01:06:24:09 - 01:06:26:21
Matt
Sorry it had to happen.
01:06:26:23 - 01:06:29:09
Marty
How's everything else going?
01:06:29:12 - 01:06:31:03
Matt
Well, that's good. That's good.
01:06:31:06 - 01:06:33:20
Marty
You look at.
01:06:33:22 - 01:06:36:17
Matt
Nice in New York. Starting to be spring.
01:06:36:19 - 01:06:40:11
Marty
Now abundant Mr.. Last week Mr. Buy a couple days. Yeah.
01:06:40:14 - 01:06:47:29
Matt
Yeah. Well, I had an event in Miami Saturday and Mr. Bunch is having parties too, but. Oh, yeah, you're fine.
01:06:48:01 - 01:07:12:12
Marty
We're celebrating our own demise. You know, it would be poetic. Yeah. All right, well, thank you for keeping us on our toes. And if you're a miner listening out there, think about this long term viability of your business. Is that is that risk? Because Bitcoin is a very important project. And if push comes to shove, the nuclear is there and will be hit.
01:07:12:12 - 01:07:25:07
Marty
If it needs to be hit, nobody wants to hit it. Let's not let it get to that. Get it off your ass. Stop focusing on the energy stuff myopically. We've got a network side of things that that is.
01:07:25:09 - 01:07:35:23
Matt
Yeah. And it doesn't take many resources to deal with the network side of things, you know, Just takes a few hours a week from your from your ops folks. You figure it out now.
01:07:35:25 - 01:07:48:01
Marty
All right. Well, I'm going to go tech some miners, maybe write a newsletter and these are around newsletter about today and then we'll post this, uh, tomorrow. Let's get the message out. That's cool.
01:07:48:03 - 01:07:49:02
Matt
All right, You.
01:07:49:05 - 01:07:55:16
Marty
It's great seeing you under these, uh, very depressing circumstances, but we've got to get it out there.
01:07:55:19 - 01:07:58:05
Matt
Yeah, Yeah, we do. We're going to get off zero.
01:07:58:08 - 01:08:02:05
Marty
And get off zero or five. The miners. Peace, love. Okay.
