Opinion
How Should Bitcoiners View Quantum Computing?
Published
3 hours agoon
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adminIn the early 2020s, quantum computing hit the public spotlight as a potential threat to Bitcoin. Relying on SHA-256 cryptographic hash function for its proof-of-work network consensus, Bitcoin’s value is predicated on computational power.
If there is a technology that can circumvent the traditional binary system of 0s and 1s for units of information, there is potential to upend cryptography as we know it. But is that danger over exaggerated?
Could quantum computing one day turn Bitcoin into a valueless piece of code? Let’s start by understanding why Bitcoin relies on cryptography.
Bitcoin’s Bits and Hashing
When we say that an image is 1 MB in size, we say that it contains 1,000,000 Bytes. As each Byte contains 8 bits, this means that an image contains 8,388,608 bits. As the binary digit (bit), this is the tiniest unit of information, either 0 or 1, that builds up the entire edifice of our digital age.
In the case of an image, bits in a 1MB file would assign a color to each pixel, making it readable to the human eye. In the case of a cryptographic function like SHA-256 (Secure Hash Algorithm 256-bit), developed by the NSA, it would produce 256 bits (32 Bytes) as the fixed length of a hash from an input of arbitrary size.
The primary purpose of a hash function is to convert any string of letters or numbers into an output of fixed length. This obfuscation blending makes it ideal for compact storage and anonymized signatures. And because the hashing process is a one-way street, hashed data is effectively irreversible.
Therefore, when we say that SHA-256 provides a 256-bit security, we mean to say that there are 2256 possible hashes to consider for reversal. When Bitcoin payments are conducted, each Bitcoin block has its own unique transaction hash generated by SHA-256. Each transaction within the block contributes to this unique hash as they form the Merkle root, plus the timestamp, nonce value and other metadata.
A would-be blockchain attacker would have to recalculate hashes and extract the necessary data not only for that block containing the transactions, but for all subsequent blocks chained to it. Suffice to say, the 2256 possibility load poses a virtually impractical computational endeavor, requiring immense expenditure of energy and time, both of which are exceedingly costly.
But could this no longer be the case with quantum computing?
New Quantum Paradigm for Computing
Moving away from bits as 0s and 1s, quantum computing introduces qubits. Leveraging the observed property of superposition, these units of information can not only be either 0 or 1 but both simultaneously. In other words, we are moving away from deterministic computing to indeterministic computing.
Because qubits can exist in an entangled and superimposed state, until observed, computations become probabilistic. And because there are more states than always 0 or 1, a quantum computer has the ability for parallel computing as it can simultaneously process 2n states.
A classic binary computer would have to run a function for each possible 2n state, which the quantum computer could assess simultaneously. In 1994, mathematician Peter Shor developed an algorithm with this in mind.
Shor’s algorithm combines Quantum Fourier Transform (QFT) and Quantum Phase Estimation (QPE) techniques to speedup pattern-finding and theoretically break all cryptography systems, not just Bitcoin.
However, there is one huge problem. If quantum computing is probabilistic, how reliable is it?
Stabilizing Coherence in Quantum Computing
When it is said that qubits are superimposed, this is akin to visualizing a coin flip. While in the air, one can imagine the coin having both states – heads or tails. But once it lands, the state is resolved into one outcome.
Equally so, when qubits are resolved, their state collapses into the classical state. The problem is that a ground-breaking algorithm like Shor’s needs many qubits to maintain their superposition for a long period of time to interact with each other. Otherwise, the necessary, useful calculations fail to actually complete.
In quantum computing, this refers to quantum decoherence (QD) and quantum error correction (QEC). Moreover, these problems need to be solved across many qubits for complex calculations.
According to the Millisecond Coherence in a Superconducting Qubit paper published in June 2023, the longest coherence time of a qubit is 1.48 ms at average gate fidelity of 99.991%. The latter percentage refers to the overall reliability of a QPU (quantum processing unit).
At present, the most usable and powerful quantum computer appears to be from IBM, dubbed Quantum System Two. A modular system ready for scaling, Quantum System Two should perform 5,000 operations with three Heron QPUs in a single circuit by the end of 2024. By the end of 2033, this should increase to 100 million operations.
The question is, would this be enough to materialize Shar’s algorithm and break Bitcoin?
QC Threat Viability
Due to decoherence problems and fault-tolerance, quantum computers have yet to pose a serious risk to cryptography. It is unclear if it is even possible to achieve a fault-tolerant quantum system at scale when such a high level of environmental purity is needed.
This includes electron-phonon scattering, photon emissions and even electron to electron interactivity. Moreover, the greater the number of qubits, which are necessary for Shor’s algorithm, the greater the decoherence.
Yet, although these may appear to be intractable problems inherent with quantum computing, there has been great progress in QEC methods. Case in point, Riverlane’s Deltaflow 2 method performs real-time QEC on up to 250 qubits. By 2026, this method should result in the first viable quantum application with million real-time quantum operations (MegaQuOp).
To break SHA-256 within one day, 13 million qubits would be needed, according to the AVS Quantum Science article published in January 2022. Although this would threaten Bitcoin wallets, many more qubits, at around 1 billion, would be needed to actually execute a 51% attack on Bitcoin mainnet.
When it comes to implementing the Grover algorithm, designed to leverage QC to search unstructured databases (unique hashes), a research paper published in 2018 suggested that no quantum computer would be able to implement it until 2028.
Image credit: Ledger Journal
Of course, Bitcoin network’s hashrate has greatly increased since then, and QC has to tackle decoherence as a major obstacle. But if QEC roadmaps eventually materialize into reliable quantum systems, what can be done to counteract the QC threat to Bitcoin?
Quantum Computing Resistance
There are multiple proposals to safeguard Bitcoin holders from quantum computers. Because a 51% QC attack is extremely improbable, the focus is mainly on hardening wallets. After all, if people cannot rely on their BTC holdings to be secure, this would cause an exodus from Bitcoin.
In turn, BTC price would plummet and the network’s hashrate would drastically decrease, making it far more vulnerable to QC than previously estimated. One such hardening is implementing Lamport signatures.
With Lamport signatures, a private key would be generated into pairs, 512 bitstrings from a 256-bit output. A public key would be generated with a cryptographic function to each of the 512 bitstrings. Each BTC transaction would need a one-time Lamport signature.
Because Lamport signatures do not rely on elliptic curves over finite fields in Elliptic Curve Digital Signature Algorithm (ECDSA), which is used by Bitcoin and can be exploited by Shar’s algorithm, but on hash functions, this makes them a viable quantum-resistant alternative.
The downside of Lamport signatures is their increased size, upward of 16KB, and one-time use. Of course, just by shifting addresses and keeping BTC in cold storage, thus avoiding private key exposure, can also prevent QC from being effective.
Another approach to confound potential QC attacks would be to implement lattice-based cryptography (LBC). Unlike in ECDSA, LBC avoids finite patterns by relying on discrete points in n-dimensional lattice (grid) space that extends infinitely in all directions. Because of this feature, there has yet been developed a quantum algorithm that could break LBC.
However, to implement a new type of cryptography, Bitcoin would have to undergo a hard fork. In that scenario, there would likely need to be many signals indicating that major breakthroughs in quantum computing, particularly in qubit count and fault tolerance, are imminent.
Bottom Line
It is safe to say that the Bitcoin mainnet itself is not in danger from quantum computing, in either the near or distant future. Yet, if QC were to compromise Bitcoin’s encryption—rendering SHA-256 and ECDSA obsolete—it would deeply impact confidence in the cryptocurrency.
This confidence is crucial, as demonstrated by major companies like Microsoft and PayPal, which have adopted Bitcoin payments, drawn by up to 80% savings compared to card transactions, zero chargebacks, and complete control over funds. With over 300 million holders globally, Bitcoin’s appeal as both a secure asset and a cost-effective payment option remains strong.
Ultimately, Bitcoin’s value is sustained by the capital and confidence behind it. Its historical volatility shows how events—ranging from Elon Musk’s tweets and PayPal’s integration to ETF launches and the FTX collapse—have impacted market sentiment. A fundamental threat to Bitcoin’s encryption could lead to panicked sell-offs, miner withdrawals, and a reduced mining difficulty, potentially opening the door to a 51% QC attack with fewer qubits.
To prevent such a scenario, Bitcoin holders and developers would do well to keep up with QC developments.
This is a guest post by Shane Neagle. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Syria’s economy is in a bad state, to put it very mildly. Not only has the Middle Eastern nation been battered by over a decade of war, the Assad regime, which has been in power since 1971, has now been overthrown by a jihadist group. The conflict, which began in 2011, has devastated infrastructure, displaced millions, and led to economic sanctions from Western nations. These factors have crippled the local economy and trade, leading to severe inflation. The Syrian pound (SYP), which was once relatively stable, has lost over 99% of its value since the war began whilst hyperinflation has turned basic goods, like bread and fuel, into luxuries for ordinary citizens.
In the face of these challenges, Syria has struggled to maintain monetary stability, with dwindling foreign currency reserves and limited access to global financial systems. However, hope may now be on the horizon since it has been announced that the Middle Eastern nation is planning to legalise Bitcoin, explore using it to back its national currency and use its energy reserves to mine it. This ground-breaking policy could transform not only Syria’s economy but serve as a potential model for other nations in the region that are also grappling with inflation and economic instability.
Bitcoin’s decentralized nature makes it immune to geopolitical pressures and the monetary policies of individual nations. This independence offers Syria a way to circumvent traditional financial systems dominated by Western powers and sanctions. Legalizing Bitcoin, and potentially backing the Syrian pound with it, will not only facilitate monetary stability but will do so in a manner that allows the struggling nation to become somewhat immune from regional economic shocks. Bitcoin could also allow citizens and businesses to transact with greater confidence and open up trade channels with countries around the world.
This does make one wonder, localised fiat systems were never a good way to cultivate trade and commerce in the Middle East, where many nations are heavily reliant on each other for basic goods and services and where borders can be porous. Many of these systems are also pegged to the US dollar which does offer a degree of stability but it also allows the US to export its inflation. The region has a long history of trade that relied on gold, since it was widely accepted and recognised as a sound store of value. Bitcoin can now play that role, as it is increasingly recognised as the best store of value and medium of exchange in the world. Bitcoin, like gold, is also much more in-tune with Islamic monetary principles, as I wrote about here.
Furthermore, Syria possesses significant energy reserves, particularly in oil and natural gas. However, due to the war, much of this potential has been untapped or disrupted. In recent years, global energy-intensive Bitcoin mining has demonstrated that regions with surplus energy resources can transform these assets into significant revenue streams. Syria’s plan to use its energy reserves to mine Bitcoin is both practical and innovative. By converting its natural resources into digital assets, Syria can generate wealth independent of traditional export markets. This revenue could then be used to bolster its economy, fund reconstruction projects, and stabilize the Syrian pound by creating Bitcoin-backed reserves. It also gives an incentive for small businesses to explore and invest in mining technology, which can lead to innovation in sustainable energy production and bolster the local economy.
One of the core objectives of Syria’s Bitcoin strategy is to restore trust in its national currency. By partially backing the Syrian pound with Bitcoin, the government can offer citizens a tangible reason to hold and use the local currency. A Bitcoin-backed pound could also attract foreign investment, particularly from tech-savvy individuals and organizations intrigued by the country’s adoption of the digital currency. Such a move also aligns with global trends. El Salvador, for instance, adopted Bitcoin as legal tender in 2021 and saw an increase in tourism and investment, despite initial scepticism. While Syria’s situation is more complex due to ongoing conflict and questions around the ideological inclinations of its new leaders, a similar strategy could yield long-term benefits once the country stabilises.
Syria is not alone in facing inflation and currency devaluation. Many countries in the Middle East and North Africa (MENA) region are grappling with similar issues. Lebanon, for example, has experienced a catastrophic financial collapse, with its currency losing over 95% of its value since 2019. Inflation across the region has eroded purchasing power, undermined trust in local currencies, and hindered economic growth. Governments reliant on imports have found it increasingly difficult to stabilize their economies as global commodity prices soar.
Syria’s legalization of Bitcoin and its plan to integrate it into its economy marks a significant turning point in global financial policy. The decentralised nature of Bitcoin gives nations the option to pursue financial empowerment in spite of the wider international context in which they find themselves in. It gives them a form of national self-custody which can act as a hedge against external powers seeking to influence domestic policy in their favour. Whilst challenges remain, such as the need for a better digital infrastructure and wider awareness of Bitcoin in neighbouring countries, it is certainly a bold step in the right direction.
If successful, Syria’s experiment could serve as a blueprint for other nations in the MENA region facing economic instability. By adopting Bitcoin, these nations can protect their citizens from the devastating effects of inflation, restore confidence in their currencies, and unlock new economic opportunities. Countries like Lebanon, Iraq, and Iran, which face similar challenges, could benefit tremendously from integrating Bitcoin into their financial systems. As the global financial landscape continues to evolve, Syria’s bold move into Bitcoin highlights the potential of Bitcoin to address some of the most pressing economic challenges of our time.
This is a guest post by Ghaffar Hussain. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Bitcoin
ARKA NOEGO / NOAH’S ARK: On Solidarity and Bitcoin
Published
2 days agoon
January 14, 2025By
adminA Peaceful Revolution
During the 1980’s, a genuine popular movement arose in Poland that ended up toppling the communist regime in that country. Although there were many anticommunist intellectuals writing and being read in Poland at the time, the spark that ignited the peaceful revolution that ended Soviet rule was lit not by the educated elite but by the working class: workers at the Lenin shipyard in Gdańsk launched a strike in 1980 that quickly spread to workers across industries and throughout the country. These workers formed the Interfactory Strike Committee, which drew up a list of 21 demands. Then, in a move reminiscent of the apocryphal story of Martin Luther nailing his 95 theses to the Church in Wittenberg, they wrote their demands on wooden boards and hung them from the gates of the Lenin shipyard.
The Gdańsk strike was triggered, predictably, by the government raising prices in a price-controlled economy while also denying wage increases. To make matters worse, Lenin shipyard managers had just fired a popular forklift operator, Anna Walentynowicz. Her co-workers believed this was political punishment for her union organizing. “What?” You might ask. “A communist government opposed to labor unions?” Yes—throughout the Soviet Bloc, only government-authorized labor unions affiliated with the ruling communist parties were permitted. One of the key demands of the Interfactory Strike Committee was the ability to form independent trade unions.
Of course, the image of workers striking against a communist government was terrible optics for the Polish government. In addition, as a Warsaw Pact country, Poland faced the continuous prospect of military intervention by the USSR. No one knew if or when Moscow would decide to “send in the tanks” like they had done in Hungary in 1956 and Czechoslovakia in 1968. Indeed, Brezhnev and the Politburo debated the idea in 1980. Eventually, they decided against it—in part because the First Secretary of the Polish United Workers’ Party (PZPR), Edward Gierek, feared a national bloodbath. The first round of strikes and protests in Gdańsk had attracted over 700,000 people, and, simply put, the Polish state feared Polish society. PZPR leadership opted to declare Martial Law instead. Thus began a decade of power struggles between the government and the people which culminated in the overthrow of the communist system in 1989.
The remarkable thing about the Polish transition to a market economy was how peaceful it was. That was largely a result of the overwhelming social consensus among Poles of all political orientations that government control of the economy needed to be dramatically lessened. The movement that emerged from the Interfactory Strike Committee was called “Solidarność”, or “Solidarity”, drawing on the trade union tradition of workers standing in solidarity with one another to collectively bargain for better wages and working conditions. Solidarity’s demand for independent trade unions was met: it did indeed become the first non-communist, non-government trade union in the Soviet Bloc.
When the strikes in Gdańsk first erupted, a marginally employed graphic designer, Jerzy Janiszewski, designed a logo for the union based on graffiti that he had seen scrawled on walls in the city. He shaped the letters of “Solidarity” to look like people standing together in a crowd, and he added a Polish flag to emphasize national unity. This logo “went viral”—it quickly began to be used nationwide as a symbol of victory over tyranny.
The success of the Solidarity trade union soon inspired non-working class Poles to “stand in solidarity with Solidarity”, and in this way it became a genuine mass movement. People from all corners of Polish society came together to oppose dictatorship and economic control: Whether left, right, or center, religious or non-religious, people—even many actual members of the PZPR—were so disillusioned and unhappy with “actually existing socialism” that, for a good decade, other social divisions started to matter far less than standing together in the fight for economic and political freedom. In 1989, the Solidarity trade union won the first partially free elections in the Soviet Bloc. This inaugurated the fall of communism in Poland and generated momentum for many similar movements in other Warsaw Pact countries.
Bitcoin as Solidarity
Today, I see many resonances between Solidarność and the growing social movement behind Bitcoin. Like Solidarity, Bitcoin crosscuts ideological and cultural divisions. Whether you are left, right, center, or unaligned; religious or not; a proponent of “tradition” or of rethinking traditional social roles; and regardless of the form of government you prefer (democracy, republicanism, monarchy, theocracy, party rule, etc.)—Bitcoin has appeal. This is because, regardless of what type of government or culture people prefer, they generally want to spend their own money whenever and however they choose. They also want that money to keep its value over time, so that they can save it profitably for themselves and for future generations.
For decades, governments around the world have been chipping away at both of these human desires: they insist on controlling how people spend their money while devaluing it at the same time. This destruction of the savings and economic freedom of entire populations can only continue for so long before people come together to say, “enough.” That is why Bitcoin can be seen as a much-needed monetary reformation: the separation of money and state.
Like Solidarity, Bitcoin is a grassroots movement emerging from below. It has a name, a logo, and open source code that are used worldwide but are not owned by anyone. While the mainstream media pays a lot of attention to “Bitcoin billionaires”, the vast majority of Bitcoin owners are ordinary people—mostly working class—who see in it hope for a better future: A future where the fruits of their labor, their life savings, are not frittered away by irresponsible governments engaged in schemes to devalue currency and control economic life. More symbolically, the 21 demands of the Interfactory Strike Committee mirror the absolute scarcity of the only 21 million bitcoin that will ever be in existence, a number hard coded into the Bitcoin protocol.
Noah’s Ark: Surviving the Flood of Money
During the rise of Solidarity, a group of poets and musicians were touring Poland, performing songs to remind people that a better life was possible. Their names were Jacek Kaczmarski, Przemysław Gintrowski, and Zbigniew Łapiński. They recorded many “protest songs” whose messages had to be carefully worded and concealed to avoid being censored. However, despite their use of poetic metaphors and allusions to history, literature, art, and the Bible, everyone understood what they were really talking about. Their songs enjoyed immense popularity throughout Poland.
I grew up listening to the songs of these three troubadours. My parents, like many in their generation, were active in the Solidarity movement and brought that ethic with them when they immigrated to the United States, where I was born. Some of the trio’s songs have particular resonance for our own historical moment and for the Bitcoin movement. In that spirit, I wanted to share with you one of Kaczmarski, Gintrowski, and Łapinski’s great songs, “Noah’s Ark”. It references the Biblical story of Noah, who survived a massive, months-long flood by building an Ark.
One way to interpret the “flood” the trio sings about in “Noah’s Ark” is as the “flood” of currency that accompanies periods of hyperinflation. Governments that are politically in trouble or collapsing always face severe economic problems, and they often print dramatic amounts of money in order to “boost economic activity” within their borders. This tends to backfire, however, as the value of the money plummets and people become increasingly reluctant to use it. This only compounds the political and economic woes of the regime, accelerating its demise. For this reason, periods of hyperinflation tend to accompany turnovers of political regimes. When I first visited Poland in 1990, for example, it was in the middle of a hyperinflation accompanying the transition between a communist and a capitalist mode of political economy. The national currency had to be entirely re-based and reissued in order to restore public confidence in it.
Those who have survived “floods” of hyperinflation around the world know how devastating they can be. Millions of Polish people lost their entire life savings as a result of the collapse of a politically and economically non-viable system of government. But Kaczmarski, Gintrowski, and Łapiński’s song reminds us that the deluge is survivable—if we have planned ahead and if we believe in our own power, as individuals and as a community, to navigate the storms.
Please enjoy their music and lyrics, which I have translated into English below.
Arka Noego | Noah’s Ark |
W pełnym słońcu w środku lata, wśród łagodnych fal zieleni, Wre zapamiętała praca, stawiam łódź na suchej ziemi. Owad w pąku drży kwitnącym; chłop po barki brodzi w życie. Ja pracując w dzień i w nocy, mam już burty i poszycie. Budujcie Arkę przed potopem! Dobądźcie na to swych wszystkich sił! Budujcie Arkę przed potopem, Choćby tłum z waszej pracy kpił! Ocalić trzeba co najdroższe, A przecież tyle już tego jest! Budujcie Arkę przed potopem Odrzućcie dziś każdy zbędny gest. Muszę taką łódź zbudować, by w niej całe życie zmieścić. Nikt nie wierzy w moje słowa; wszyscy mają ważne wieści. Ktoś się o majątek kłóci, albo łatwy węszy żer. Zanim się ze snu obudzi, będę miał już maszt i ster! Budujcie Arkę przed potopem! Niech was nie mami głupców chór! Budujcie Arkę przed potopem! Słychać już grzmot burzowych chmur! Zostawcie kłótnie swe na potem; Wiarę przeczuciom dajcie raz! Budujcie Arkę przed potopem, Zanim w końcu pochłonie was! Każdy z was jest łodzią w której może się z potopem mierzyć Cało wyjść z burzowej chmury—musi tylko w to uwierzyć! Lecz w ulewie grzmot za grzmotem, i za późno krzyk na trwogę, I za późno usta z błotem, wypluwają mą przestrogę! “Budujcie Arkę przed potopem!” Słyszę sterując w serce fal! “Budujcie Arkę przed potopem!” Krzyczy ten co się przedtem śmiał! “Budujcie Arkę przed potopem”— Naszych nad własnym losem łez! “Budujcie Arkę przed potopem!” Na pierwszy i na ostatni chrzest! | In the full sun in the middle of summer, amidst gentle waves of green, Verily, the enduring work: I raise a ship on dry ground. An insect buzzes in a blooming bud; a peasant wades through life up to his shoulders. I, working day and night, already have the starboard and the sheathing. Build an Ark before the flood! Give this all of your energy! Build an Ark before the flood, Though the crowd ridicule your work! What is most precious must be salvaged, And there is so much of it already! Build an Ark before the flood! Cast aside, today, every superfluous gesture. I must build a ship in which to fit my entire life. No one believes my words; everyone has “more important” affairs. Someone is arguing over a fortune; or he smells easy prey. Before he wakes from sleep, I will have a mast and helm! Build an Ark before the flood! Don’t be beguiled by the choir of fools! Build an Ark before the flood! You can already hear the rumble of storm clouds! Leave your arguments for later; For once, trust your instincts! Build an Ark before the flood, Before it finally overcomes you! Every one of you is a ship in which you can square off with the flood To come out of the storm cloud whole—you just need to believe that! But, in the downpour, lightning strike after lighting strike, And the cries of danger come too late, Too late do lips spit out my warning with the mud! “Build an Ark before the flood!” I hear, steering into the heart of the waves! “Build an Ark before the flood!” Cries the one who previously laughed! “Build an Ark before the flood”— of our tears over our fate! “Build an Ark before the flood!” For the first and the last baptism! |
This is a guest post by Natalie Smolenski. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Decentralization
Using Mining To Create More Fully Validating Bitcoin Users
Published
6 days agoon
January 9, 2025By
adminBitcoin’s value proposition relies on its ability to resist any type of censorship. Without that feature, Bitcoin loses its power to challenge and resist any authority that wants to subjugate Bitcoin to the same rules that apply in the traditional world. With this in mind, it’s paramount that bitcoin has no central points of failure whatsoever. If there is a gatekeeper, there is a vulnerability. If there is a vulnerability, it will be exploited. And at that point, Bitcoin as an exercise of free and decentralized digital money simply stops.
To ensure the network’s decentralization, robustness and anti-fragility, we need to maintain the very components that assure us, through time-tested battles, of these very properties. No entity in the world can feel like attacking Bitcoin will be a successful endevour. The best way to do that is to spread Bitcoin as far as possible to all corners of the globe by running nodes. Just like a monetary virus. The more it spreads, the higher the chance it succeeds.
Satoshi mentioned several times that all the former electronic money projects failed due to their centralization features. A monopoly on the supply of money is a power that governments and the financial system will not let go easily. To make sure that Bitcoin will not be stopped by any bad actor, it’s our duty to ensure that Bitcoin’s decentralization increases all the time. Forever.
A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.
Bitcoin open source implementation of P2P currency
https://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of-minting-his-own-currencyhttps://www.indianapolismonthly.com/news-and-opinion/business/mad-money/
Looking thoroughly at what Bitcoin accomplished so far and where it is right now as a global network, it’s a fact that the network is very decentralized. Nevertheless, just like one can argue that bitcoin´s purchasing power doesn’t have a top, bitcoin’s decentralization level also doesn’t have a top. The more, the better! Beyond a certain level of decentralization, any attack on Bitcoin is not only pointless for the attacker, but also detrimental, since the attacker’s failure ends reinforcing bitcoin’s capability to resist any attack, strengthening the network in the process, while diminishing the perceived success of any attempt of attacking Bitcoin. Anti-fragility in its purest form!
Hydra – mythological figure from the Book of Revelations. Every time one of the heads got chopped off, the Hydra would regrow two heads. Every time the Hydra got attacked, the Hydra grew stronger. The Hydra is anti-fragile. Bitcoin is a monetary Hydra.
What’s the level of decentralization that assures that any potential attacker is completely disincentivized from attacking the network? No one knows for sure. We can only estimate it. Nonetheless, the best strategy is to just decentralize bitcoin as much as we possibly can. And the most important tool that we have at our disposal is running as many nodes as possible all around the world.
Nodes fulfill one of the most, if not the most important role in Bitcoin. By following the protocol rules, they verify and validate all the transactions and all the blocks that get propagated throughout the network. They also relay all this information to other nodes and store all blocks published by miners. If a transaction, block or other piece of information violates the consensus rules of the protocol, nodes automatically reject it. Nodes are essentially the referees of the bitcoin game, making sure that everyone plays fair like they are supposed to.
Bitcoin nodes working
If more nodes join the network, more referees will be verifying everything that happens in Bitcoin. If more nodes join the network, there will be more copies of the entire blockchain. If more nodes join the network, more assurances there will be that every actor behaves the way it should. Every time a node joins the bitcoin network, anyone that wants to attack it will have to chop off an extra head in order to kill this monetary Hydra called Bitcoin. If you don’t run a node yet, it’s time to do your part.
Unfortunately, and unknowingly to the majority of bitcoin users, the vast majority of miners do not run a node nowadays. Providing valid shares to the pool operator is all that’s necessary to get paid for their work. It’s commonly said that miners are being paid by the network to protect it against all adversarial attacks by building a wall of energy so dense that it’s impossible to penetrate it. However, if we want to continue with this analogy, what we observe is that miners are employees of the pools, not of the bitcoin network. There is no direct connection between miners and the network. Miners are effectively selling computing power in the form of hashrate to the pools. The responsibility of picking the transactions that go in the block, creating the blocks themselves, propagating said blocks found throughout the network and receiving all the necessary information gets delegated to the pools. This effectively means that Pools are the ones censoring, or not, the network and thus undermining Satoshi’s original vision of an open and permissionless protocol for value transfer.
Furthermore, if the level of decentralization hadn’t been reduced enough just by that, there are proxy pools. Proxy pools are basically a wolf maskerading in sheep’s clothing. Same pool, but a different brand. This means that if some big Pool A has 20% of the Hashrate, but 3 smaller Pools B, C and D have 5% each, effectively Pool A controls 35% of the hashrate. That would be enough to do a Selfish Mining attack and harm the network. Thus, what we end up with is just a couple of “main” pool nodes deciding which transactions make it to the blockchain. This situation doesn’t look very decentralized. That’s because it isn’t. Thankfully, there is a way to fix this. It’s called Stratum V2.
Stratum V2 is a new mining protocol that hopes to bring a series of new features that make Bitcoin mining more secure, more efficient and of course, more decentralized. Its reference open-source implementation was developed by an independent, community-run of more than 15 developers over the past three years, battle-tested with more than 30 000 downstreams. With this new protocol, Bitcoin’s decentralization can reach new heights. How, you may ask? By giving miners the ability to create their own block templates and pick the transactions that get included in blocks. To have this capacity, miners must run a node. More nodes means a more decentralized and robust network. Once all miners are the ones building blocks rather than pools, we can finally witness Bitcoin taking another step towards invincible decentralization.
DEMAND pool is the first mining pool to implement the reference implementation of the Stratum V2 protocol. Our mission is to first and foremost, contribute to the network’s decentralization and to end the threat of censorship on Bitcoin. If you’re a miner and want to be in the drivers seat, consider joining our pool. Lifetime special conditions and other features will be available for founding members of our pool.
It’s time to improve Bitcoin’s decentralization. Are you coming?
This is a guest post by Francisco Monteiro. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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