TFTC: A Bitcoin Podcast - #501: Bitcoin Mining Pools Are Critically Centralized with Matt Corallo

Episode Date: April 24, 2024

Marty sits down with Matt Corallo to discuss the Antpool situation and how the centralization issue can be solved. Matt on Twitter: https://twitter.com/TheBlueMatt 0:00 - Intro 1:27 - The pool problem 14:42 - Miners haven’t switched 22:04 - Miner priorities 27:38 - Taking action 40:11 - Gradually, Then Suddenly 40:50 - Addressing bias 42:59 - Is switching difficult? 46:14 - Nuclear option if someone takes control 51:30 - Solutions 1:00:51 - Complacency 1:06:40 - Go test StratumV2 1:09:48 - Bitcoin success percentage and wrapping up Shoutout to our sponsors: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠River⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Unchained⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Zaprite⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Bitcoin Talent Co⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Gradually, Then Suddenly⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TFTC Merch is Available: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Shop Now⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the TFTC Movement: Main ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠YT Channel⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Clips ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠YT Channel⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Website⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Marty Bent: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠

so freaks it's your boy marty here to introduce this rip of tftc it was brought to you by our good friends at river the best place to buy bitcoin river makes it very easy to buy bitcoin to sell bitcoin if you want to do that you shouldn't sell it they actually have a new a new thing at checkout if you're trying to sell bitcoin michael saylor comes out and says are you sure you want to sell bitcoin right now probably shouldn't you should dca into bitcoin river makes it very easy you can set it and forget it by daily weekly monthly if you dca using river you're not going to pay any fees on those buys it's the easiest way to gift bitcoin with river link you set an amount of bitcoin you want to give somebody you create a link

you send that to somebody you text it to them you email them you dm it to them they click the link and then they can sweep the bitcoin to their river account or a wallet of their choice it's a beautiful thing river builds all their infrastructure in-house they don't depend on third parties it's the best place to buy bitcoin it's where we buy bitcoin go to river.com slash tftc sign up today you'll get five dollars worth of bitcoin this rip was also brought to you by good friends down the hall unchained unchained is here to help you eliminate single points of failure in your custody model price of bitcoins going up if you talked about owning bitcoin publicly uh you could be subjected to sim swap attacks had a friend had this happen to him

recently where he got sim swapped attack they went to go drain his exchanges got past 2fa all that luckily they didn't get his bitcoin because he has his bitcoin in unchained multisig volt which keeps your keys offline and they're always in cold storage so you don't have to worry about somebody sim swapping you and stealing your bitcoin unchained also has an ira product uh if you have a retirement account you want to get exposure to bitcoin get direct exposure you don't have to buy the etfs you can actually hold the bitcoin take it in kind as as one should be able to do unchained makes that very easy go hit up unchained's concierge team go to unchained.com slash consultation learn about all their products

the vault the ira they have a trading desk they have a lending desk they're doing it the right way unchained.com slash consultation tell them that tftc sent you this rip was also brought to you buy our good friends at zap right uh if you're an individual out there who wants to accept bitcoin as payment zap right is the best way to do that go to zap right dot com slash tftc set up an account and zap right makes it very easy to connect your own wallets to wallet agnostic you simply enter an xpub connect your lnd node connect your strike account whatever it may be and zap right handles the invoicing side of things you can send invoices payment links they have a woo commerce integration so if you're a trucker a rancher a farmer a doctor a lawyer wants to

accept bitcoin as payment go to zap right connect your wallets and start doing so today the best part about zap right is they also accept fiat payments so you don't have to have individual invoicing for people that pay in bitcoin and people that pay in fiat you do it all in one spot you can connect stripe your ach and you send one invoice and they can pay in fiat or bitcoin it's beautifully designed. They have dashboards, analytics, everything you need to hand over to your bookkeeper or your accountant. So again, go to zapwrite.com slash TFTC. Use the promo code TFTC at sign out, and you're going to get $40 off their annual subscription fee, which is typically $240. So with the code TFTC, you drop that down to $200. Zapwrite.com slash TFTC. Last but not

At least that's where it was brought to you by our good friends at Bitcoin Talent Co. Bull markets here. You may be looking to hire as your runway is extending because you have a bunch of Bitcoin on your corporate treasury. Go to Bitcoin Talent Co. It's a recruiting firm built by Bitcoiners for Bitcoiners. They understand Bitcoin multisig. They understand mining. They understand the Lightning Network.

And they're highly competent recruiters. Andy, the co-founder, started Uber, grew their team from 100 to 10,000. He knows what he's doing. he knows how to go find the best talent in tech design banking finance whatever you need they're going to understand your needs and they're going to go get you the best talent to help us build out the bitcoin standard bitcointalent.co tell them to tftc send you and enjoy this rip okay you've had a dynamic where money's become freer than free If you talk about a Fed just gone nuts, all the central banks going nuts.

So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Mr. Corallo, take seven, I believe. Welcome back to the show. Thanks, thanks for having me

Sorry, you seem a little down Yeah, we've got a few of those Yeah, that's probably true I think this might be the peak of my bearishness on Bitcoin as a notorious Bitcoin bearer I think this might be the peak I mean, the first time you were on

you said Bitcoin had a 5% chance of success Are we below that now? We might be we might be I think things are looking real bad right now alright let's get a visualization of how bad things are looking

particularly at the mining pool layer so this is a tweet from OX B10C who'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 Mononaut from mempool.space have been sounding the alarm that it looks like if you look at the Merkle branches that mining pools send to miners as part of their stratum jobs, it's clear that the btc.com pool, Binance pool, poolin, emcd, raw pool, and possibly brains have exactly the same template and custom transaction prioritization as Antpool.

um so this equates to about 50 percent 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 yeah so basically they're all the same pool from the perspective of bitcoin uh these are all the same pool not good no no it's not good so i mean i think it's so it's important to to kind of 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't stop

me from using however i see fit it is freedom money um and that comes from censorship persistence that comes 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% of hash power. You know, throughout all of Bitcoin's history, we've had a lot of centralization in pools. 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 percent, 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. You know, I don't know why I know the price is up, but people should not be bullish with this news. no and was this news an accident because the way I understand this became apparent

to Mononaut 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 coinbases

that were assumed to be from separate pools that fall under this umbrella yeah so mononaut noticed that clearly all of these pools are using the same custodian so basically all the money from all these pools is going to the same place um 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 um you know still if they're separate entities and importantly if there's separate entities selecting the transactions and creating the work right the the important part for bitcoin is who selects the transactions that go in the network

in in the blockchain and as long as there's a lot of those then hopefully we do okay but when there's but then uh ox b10c 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 node to select the same transactions uh 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 for the same pool 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 yeah so i think that i think there are business reasons here um so what has been

And what I've 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 in the block template, irrespective of, you know, the block award, whatever. um and that's really expensive uh and you and you need a very large balance sheet to actually pay out fixed paper share so we saw this with pool and going bankrupt um six months or a year two years ago uh right they offered fixed paper share for a lot of their mining customers a lot of their miners uh the miners often want it for their own business reasons it's just more convenient to deal with on their part um 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 blog withholding attack no way to know that no way

to know um and then they couldn't meet their payout obligations and so they went out of business or they went bankrupt i guess they're now still in business or back in business but now they're just proxy for antpool so it's all the same um so i guess they got absorbed by the org um after going bankrupt but it's it's very impractical as a small to moderate sized pool to offer fixed paper share and in fact even as a large pool if you don't have an absolutely giant balance sheet you can't offer fixed paper share and so it appears to have happened as all these pools basically said our users are want fixed paper share we can't offer fixed paper share with our balance sheet without risking bankruptcy um 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 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 yeah the central bank of the mining pool right ecosystem essentially right you mind if we get conspiratorial here i wouldn't expect anything left i mean we had the china mining ban in 2021 a lot of media focus 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

we saw the network hash rate fell 50 to 60 percent soon recovered those miners went all around the world i believe 20 of hash rate has settled back in china there's a material amount of hash rate still in china but for all intents and purposes there was a ban on hash rate 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 to be bitmain too right it continues to be it seems like bitmain has with the exception of f2 pool bitmain has kind of recreated this conglomerate and this ownership of uh bitcoin mining hash power

in a way that we you know they during segway 2x we saw bitmain's behavior and during the segway drama we saw kind of a clear desire from bitmain to act as the arbiter of the bitcoin network right 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 uh concluded that And dear God, this is like no one. Why does someone want to be in charge of Bitcoin? This is kind of antithetical to the whole thesis of Bitcoin. And now they have 40% hash rate again.

Yeah. And we all seem to be okay with this. Yeah. Well, it's funny because we do have a precedent of this in Bitcoin's history with GHash. Was that 2015? Right. And I think what puts that up, what's a little different there is G-Hash asked miners to leave and some miners did leave. All the miners left. G-Hash isn't around anymore because everybody freaked out.

Well, certainly, eventually. But not right away. It did take a little bit of time. But, you know, there's always, there's often this narrative in Bitcoin where people say, well, well, well, it's okay that pools are very centralized and that there's only a few pools and whatever because mining hash rate can just switch to a new pool overnight in five seconds mining miners will you know if the pool tries to do anything bad miners will immediately switch to another pool 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

that they negotiate over the course of months um you know you can't move overnight often you'll have a backup you know you might have two contracts you have you have a contract with some backup pool uh 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 um but you know obviously miners aren't going to switch overnight of course reconfiguring all these machines and and uh negotiating a new business contract but also miners haven't switched in the last two weeks the ant pool and bitmain pool conglomerate has not materially reduced its hash 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 yeah and it's gotten to a point too 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 and that adds a little variable to the game theory of the decisions that are being made

and as you mentioned it's become hyper industrialized since the GH days so a lot of these companies have boardroom decisions that need to be made it's not people running

moonshine operations that were able to make decisions on a whim like they were back in 2015 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 uh you know miners need consistent payouts or they at least want consistent payouts um and in many case need or they just simply will go under because they won't able to afford their electricity one month because they got unlucky and didn't find a block um 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 um so there's in the olden days there was p2 pool people stopped using p2 pool in part because of misunderstanding they'd see high orphan rates in the ui but uh and confuse that for uh not getting paid you know if you have a five percent orphan rate people thought that that meant you lost five percent of revenue which wasn't the case it's you know if you have a five percent orphan rate and everyone else has a five percent orphan rate everyone still gets the right revenue and it's fine um so there was a

little confusion in in the ui it did have some issues some people had a higher orphan rate which did uh 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 um so you know it had some issues but people could still do it people could go set up private p2 pools you know 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 to you know operate the pool and manage the nodes and you know make sure that the payouts are correct whatever you could run a private p2 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 v2 is finally in beta so the the sri product that uh spiral my employer funded for many years spent you know hundreds of thousands of dollars paying people to work on this and to build this software suite exists it works people can try it out now 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 care deeply about bitcoin and they'll switch pools overnight if they have to if that were true we'd see miners running around testing strata b2 today right we'd see miners saying look we care deeply about bitcoin we've invested all this money in

asics 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 um then we'd see every miner testing stratum v2 right we'd see every miner taking three of their machines three of their rigs pointing at demand you know there is a production pool that runs stratum v2 you can go mine on this pool called demand pool that was um one of the guys who was working on stratum v2 and somebody who's been around the mining space for a while went and founded a pool to offer the service to people um we'd see people doing that and we don't right we don't see anyone caring about the issues of mining centralization for the mining side today which is very frustrating so it feels

like you know technologists have done the work and the vast majority of miners certainly there are miners who who care deeply about these issues and you know maybe aren't aware of these things or don't have time to to invest to switch their architecture you know maybe it's on the roadmap they just haven't gotten to it yet but i think the vast majority of miners that's clearly not true the vast majority of miners clearly have demonstrated very little care for the bitcoin network yeah no i'm 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 and asic procurement side it's been right somewhat myopic in terms of driving down your input cost and neglecting the yeah i mean

the back end actual health of the network 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 farm's 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 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 they care about that um and you know this needs to rise to the top of the priority list it needs to rise to the top of the priority

list right fucking now because it turns out all the pools are lying 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 antpool that they weren't mining on you know these these pools like pool and it's actually just antpool now or btc.com i mean those were always the same owners obviously btc.com and antpool but um 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 stratum v2 build a private p2 pool network fun grade pool there's a another project where somebody is trying to revive p2 pool but fix a lot of the issues um that made p2 pool

a little less practical to mine on for a large business um that is still early it's not certainly not available for use yet um 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 make that an option for them so that they have, you know, a decentralized alternative to the pools that they're trusting. Yeah. Logan, 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 and they're testing Stratton V2, at least the encrypted hash delivery from the individual miners to the pool um 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 v2 you have to ask are you testing stratum v2 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 v2 they'll like very naive protocol that's just stratum v1 with some better crypto because that that doesn't help bitcoin that helps miners you You know, you get encryption, you get a little lower bandwidth usage, it's a little more efficient, fine, whatever. But it doesn't help Bitcoin. No. So to be clear, I don't actually know whether Strato or whether Foundry is testing the full custom work selection protocol or not.

I haven't spoken to them about this. I know some other Strato V2 folks have, so I'm not trying to throw them under the bus. But I know, for example, Brains, and I don't want to throw Brains under the bus. They're great folks, but they're a small business that has to pay out fixed paper share, and I don't know that they're really in a position to do that, and they don't support Stratum V2 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 don't have the resources for it, or I don't know if they just have to join the pool borg conglomerate because it's the only way they can stay in business. I don't know where their head's at, but they don't support it either. Currently, it's only demand pool. Yeah, and Brains particularly made the switch from PPL&S to FPPS last year after being PPL&S for the longest time. Right.

The scuttlebutt around the industry is that they lost large clients because they were PPL&S, so basically bent the need of PPS to solve that problem. Yeah, 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 Strata V2 with custom work selection and still do fixed paper share. It's totally an option if a pool wants to offer that.

But for the most part, this demand of fixed paper 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 – you're 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. yeah now the pie chart is really disconcerting because that's again like what options do the miners have right now and there's few yeah you have far between so it's begs the question is there need for like a skin shedding here it's the mining pool industry like a snake that needs to shed its skin and have new new entrants pop up like demand like ocean totally you know i mean if if but 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 pplns from demand or ocean um you know maybe it's going to a pool and saying look you ship stratum v2 with custom work selection in six months or we walk and be ready to switch to demand you know maybe demand gets some hash power from that and pplns or whatever so that you know you still get the same average revenue but a little less consistent and you know miners at some point need to be willing to do some of these things so that bitcoin bitcoin operates well so the bitcoin's actually worth something 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 uh it's got some validity to it that miners are somewhat of the cavemen in

the industry just plug in machine pay their electricity bill get bitcoin out the other end don't really think much um obviously that's uh it's not completely true but i think it's directionally correct that there's a lot of miners particularly that have come into the space the last few years just see this arbitrage opportunity between the price to produce bitcoin and the price that it's trading at at any given point in time but there's a lot of upfront capital that goes into that deposits for electricity content contracts deposits for asics paying for asic delivery all the infrastructure around it the actual housing and 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 isn't solved yeah i mean you know whether it's that happens one way or another eventually um probably not probably not soon you know there's like three different ways or four different ways that that capital could be a problem um that that investment could be become a problematic investment if this doesn't get fixed either bitcoin gets censored you know whether it's regulatory decision um 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 cold and nothing, left 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 but miners haven't adopted it so we need to fire the miners and we need to pick a new crop of miners who's gonna 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 to replace because the proven work function change just to specifically force all of them to go bankrupt pull out the nuclear you know i'd like like i don't you know eventually something is going to give right if if this doesn't change and doesn't change in the next five to ten years something is going to give and it's probably just one of those two yeah i haven't heard the hash function change threatened since uh the fork wars when luke dasher was putting it forth yeah 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 like miners don't you know when we were talking about like the block the the fork wars and segway 2x and all these things that the hash function wasn't you know 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 the hashers 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 valuable so you know they were kind of along for the ride um 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 um and you know If it were just like, well, the incentives are off and there's no way for them to do something that's better for the network while still, you know, having a sustainable business and a good business, then that'd 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. Okay. SRI is only in beta. Fine.

It won't be released soon. But the miners haven't. You know, the miners haven't started testing these things. The miners haven't explored P2 pool and the miners haven't been, you know, I've seen zero miners involved in discussions around braid pool, zero, right? 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 there's, you know, if you switch to P2 pool, it might be PPLNS or something.

But, yeah, if you get enough hash power, it 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 censored. Yeah. That's going to cause a lot of – I don't think – And I don't think that's a short term. I don't think that's a short term thing

it's very painful no I'm putting on my tinfoil hat now because I think of how ingrained mining operations have become with grid systems off grid systems it's a big industry now it's a massive

industry and the vested interest in the ancillary services beyond bitcoin mining the precarious situation that something like changing the hash function would put them in

is pretty heavy to think about. You're talking about grid instability potential in Texas. Yeah, 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 new ASICs

and build similar systems. So you're right, it'd be painful, but hopefully it wouldn't have to be that painful. No, it would be painful. It would be a logistical nightmare. I mean, that begs the question, too. I mean, we've been getting at it, beating around the bush, but, 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 are 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 um should it be well and again you know somebody had yeah well i mean you know it's as you mentioned it's not a good business in many cases so you 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 binance right binance runs a pool it's just a proxy for for hand pool and we've known that for a while i think they said that publicly um but you know now we know that even more pools are actually just proxies for hand pool um 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 p2 pool instance you know maybe they create their own you know mutually untrusted pool where they all join in they all you know operate p2 pool nodes the software exists you don't have to fork it you just gotta run it you know it's been p2 pool was popular in 2012 2013 like i mean you know it's been around forever um and you know maybe it

should just be a side part of the business of running a minor you know maybe you just need to hire one guy or not even one guy you know maybe just your current ops people are capable of running p2 pool on the side um and the business folks run around and join forces with a few other miners to to create you know these private mining pools yeah you know maybe we shouldn't have mining pools but have you personally talked to any of the bigger miners about this or not this idea specifically um you know i think that is a bigger shift in the industry and i don't know how many miners are ready for that um you know i think getting stratum v2 over the line is a little bit an easier sell because stratum v2 is basically the existing business you know you're still

working with a mining pool you're still you know doing the same uh same thing you do now but you just run a little different software um and so i think that's i certainly thought that was an easier sell uh 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 i 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 i think i remember it had to be 2018 or 2019 meeting in new york talking about stratton v2 for the first time at a vegan restaurant midtown yeah it's been a while it's an old idea you know it's it's an old idea i mean the idea itself

predates stratum v2 you know pre previous iterations of the protocol um sadly stratum v2 as a spec uh 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 as a software engineer. We'll pay you. Please work on it. We struggled for a long time to find anyone to do that. We eventually did. It's now an open source project that is available. It's in beta. There's a handful of people working on it. We still fund, I think, one or two of them. So it took a while, but it is finally there. And now it's time for miners to do their jam jobs and start testing it and start working towards it.

Quick break here, freaks. This rip is brought to you by Gradually Then Suddenly, a framework for understanding Bitcoin as money by Parker Lewis. I wrote the foreword to the book. I'm honored to have done so because it's the best zero-to-one primer if you're looking for a logical explanation of why Bitcoin obsoletes all other money. Buy one for yourself and maybe a few for your friends.

Go to thesafehouse.com slash gradually. That's thesafehouse.com, safe spelled S-A-I-F. the safe house.com slash gradually use the promo code tftc for five dollars off at checkout buy it now freaks the price of bitcoin is going up you need to understand it this is the best zero to one primer back to the show what would you say to people um who hear this and say he's shilling his own bags he's been working on stratum b2 for the better part of a decade um he wants to see his baby get into the world like this isn't something we have to worry about we have somebody with um bias putting forth a solution they want to see in the world yeah i mean again i don't really

care if it's stratum v2 or private p2 pools or braid pool um i didn't i worked on the design of the stratum v2 protocol i haven't actually worked at all on the software i'm shilling other people's software for the the sri the stratum reference implementation uh that some other few people people built um 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 and i think bitcoin only has value if it is you know i think as i think stratum v2 is the most likely way to get there because i think it you know continues the existing business models that people are used to and people

are comfortable with um and you know you can continue to use a pool you know if we switch to a bunch of private p2 pool instances then you know variance is going to be higher and people might not like that but with strata v2 your variance doesn't have to be any higher your 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 um so i i think it's the most likely but i i don't know if other if something else gets adopted 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 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 maybe maybe i don't know that i've spoken to enough miners to have an understanding you know i know again most miners don't necessarily have a big tech staff they don't have a bunch of engineers who are going to go you know implement stuff they do many miners have some uh software engineers because they build their own mining farm management in-house um 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 you know one uh little you know you buy the little intel nux the little you know pcs that are like this big they're like raspberry pies but they're actually powerful

they're not you know garbage um you buy one of those and you run some open source software on it there's packages you just download the binary and run it um and then you configure it you point pointed to demand pool i don't know if you even need an account i think you probably need an account 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 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 setups but it's also not a one-day project it's a few-hour project you know test it out try it with a few of your mining rigs you know take a few of them off the shelf point them to your point them to your

machine join the discord there's a bunch of engineers there who would be happy to do as much customer support as you need to get going um 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 slot this into people's you know business plans for the next six months you know if you're a minor and you you know you got to figure out when you have time to do this but you know in the next six months you should be able to make some time to at least get this tested get going get a few of your devices on on demand pool, you know, tested out. Yeah. Yeah. Yeah, it is. It's scary to think about. And I do think to

put my minor hat on, I think, again, people have 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 pool that people were proxying into until a couple weeks ago 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 pool is not willing to tell you that you don't want to do business with them yeah no no again conspiratorial like was this china's was it a smoke and mirror campaign smoke we're banning mining um kick all the actual asics out and then control the pools to censor bitcoin eventually could be and then another thing i don't think we need to jump to uh conspiratorial in the chinese government sense we know bitmain has a long history of of a desire to control bitcoin um and a very a a deep misunderstanding of why this is bad um you know certainly a big part of that was jihan when jihan was ceo he's not there anymore he's not supposedly not there anymore um so you know maybe that culture has improved but historically that's

been a part of the company a part of jihan's whole mo was 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 asics you got to use our pool and you got to let us have uh you know control bitcoin or use one of our proxy pools They're one of the pools we, you know, at the time, I don't think they were 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. Yeah. Not even Gion now at Bitdeer. There's still arm's length connection to Bitmain. Pretty sure they're supplying all Bitdeer's machines. So still a close relationship. Yeah, probably. I'm sure

yeah it's it's not good 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 eventually Braidpool I don't know where Braidpool 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 exploring those options

now you know that needs to be on the road map in the very short term because we're in such a bad place right now 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

yeah what hash function would you would you prefer to use honestly just leave shot 256 but use a 64-bit timestamp let's just fix the timestamp issue keep shot 256 who cares and we'll yeah we'll just uh break all the miners and replace them with new ones that would be if we're what is it murphy's law anything that can go wrong will go wrong um that would be uh just from a pure masochist masochistic uh just uh infinitely curious to see what the worst case scenario would be like and how it would play out that would be to be clear

you don't want it to get to that point 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 uh the the hash funk changing of the hash function is known as nuclear option where it's like a last resort miners are fucking around you hit the button you change the hash function yeah induce a little chaos 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 the etfs are here matt yeah price is going up but you know we got brc20 tokens price is going up but i i or price had been going up but like i don't understand

you know if you're in this for just the price what are you doing you know and 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 if miners can censor the the blockchain then bitcoin is not fuck you money yeah i completely agreed not to be clear i was being facetious um the uh i know the uh yeah the the number go up amnesia mark goodwin used that term for the first time on the show last week i thought it was a very good term but that 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 um and forget about the things that are important um right yeah we need a slogan any good uh any good attempt to drive change it's a slogan fire the miners yeah light a fire on other miners ask threatening to fire the miners I was going to say something that's a bit too uncouth to put on air but that's the thing these Chinese pools have a lot of control and historically

they've been very opaque and hard to deal with, hard to get into control of unless you're Chinese so that's the interesting thing I find it hard to believe that any of the Chinese mining pools particularly those directly controlled by Bitmain, so BTC.com

an amp pool would ever willingly adopt something like shroud and v2 yeah maybe not and you know and if if 20 of the network hash power is still on 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 needs new hash power 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 because I've heard

the idea floated where you create this pool that would be similar to Ampool in these regards but it's a non-profit with very specific with a very specific mandate which is to gather

transactions that get the highest fee within a block and then broadcast a transaction, then you can proxy pool into that and do things on top of it. But, you know, you're still subject to whatever jurisdiction that pool is based in. So, you know, now we have this one big mega pool

based in the U.S. and the U.S. 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 U.S. government says Bitcoin is now censored. And so it is.

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 yeah i wonder if some of these larger miners should 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 a big hash rate leak when they were PPL and S they had publicly traded miners that couldn't stomach the variance but ideally if you did that much I get not stomaching variance but PPL and S is not super high variance

it's only high variance when your pool is particularly small right which brains was brains wasn't a very large pool um so they ended up with high variance but you know you can have a much larger pool that's ppl and s and his phone died his phone probably died you know then miners in those cases we see so even when you know even when you see these big pools uh even when you see these big pools that have very little variance uh you still see miners demanding FPPS, because it still just seems a little better for them, right?

And it is really detrimental to Bitcoin, detrimental to their pools. Yeah. We lost you there for a few seconds, but I think I grokked what you were saying. Yeah. This is going to be a hard problem to solve. Again, because you have a lot of capital

sunk into this. You have a lot of business relationships. A lot of tough conversations are going to need to be had by large miners and the pools that they point their hash yeah i mean it is a tough problem to solve but also not a tough problem to solve right 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 and that stratum v2 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 you can keep the same payout structure you can keep the same you know all the same uh contracts you have in place with your pools you keep the same pools and all you do is change the software and suddenly bitcoin is decentralized again right and so that's the beauty of something like stratum v2 when you do custom work selection is nothing really has to change but you know miners just have to change the software yeah again i'm trying to think of how to even start this cover i mean this is a way to start the conversation but actually drive drive change um well you send them this podcast you tell them that we're going to change the fucking proof of workout from under them so they better fucking get off their ass and do something

about it yeah i don't think the logistics that would go into that like there would have to be like a tangible alternative in terms of like asics they could actually acquire and plug in once the proof of work function has been changed like do they exist yeah yeah i mean you know we can get there um 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 system, if miners have no interest in providing a decentralized system, then Bitcoiners can figure out the logistics. You know, there'll be a lot of value in being the first one with an ASIC for a new proof-of-work function, and so I'm sure people would build it. I'm sure people would buy it.

I'm sure people would plug it in. Yeah. Then you have another. Yeah, this is a shit show. Then you have a problem there if, like, somebody corners the market at those ASICs that you changed to, and it's just, like, centralized when you relaunch. Yeah, I mean, you know, it can't be worse than today, right?

50% in one pool? It can't be a hell of a lot worse. Yeah. Before Stratton V2, like, what option do miners have now to help reduce this problem? i mean point your hash yeah i mean get off yeah get off one of these that main proxy pools um you know uh get off yeah really that um you know foundry is not great either but you know look at that um you know just care about where your ash is pointed just care you know if if any material

number of miners gets off these bitmain proxy pools and off f2 pool or f2 pool off foundry then suddenly we'll have another big pool 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 v2 over the next 6 to 12 months it's going to take me a while to get to it um what can i do now you know i'm currently mining on one of these pools that was lying to me that's actually a proxy for bitmain proxy for antpool um what do i do well you know 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 demand also also

offers strategy one endpoints you know you can go i i you know use demand as an example there's i'm sure there's a handful of other small pools that that aren't proxy pools um i not super up on the the list of all the small pools in bitcoin that don't have material hash 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 you all switch to it and overnight there's a new big pool and you don't suffer any increase in variance 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 is ocean pool yeah ocean is another option no 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 whole ordinals brc20 like a way to lock people into these pools because they're more willing to facilitate those transitions the only ocean is the only miner that's not willing to to include that stuff so you know any other pool or ocean's the only pool any other pool will do right just pick any other pool um for the few who are willing to to suffer a little less income for you know some kind of philosophical argument use ocean fine um you know please just don't use don't use one of these bitmain proxy pools yeah yeah going back to g i mean it is astonishing how uh complacent people have gotten anchoring back to GHash.

I mean, people, Peter Todd sent out a tweet and people left that pool within hours. Yeah, it lost a lot of hash rate pretty quick. You know, it still had a lot of hash rate for a while, but it did eventually, you know, lose a lot of hash rate that 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 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 ghash had to tell people they weren't accepting new uh users you know it really it took a lot of effort to get people to stop using so much GH. But they did collapse.

They did collapse after 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, this is my pool. 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 that it turns out was lying to me and people are kind of okay with that yeah and that's right there no it's going back to um so yeah no f2 pool and pool btc.com brains via foundry yeah i mean the that's that's what i'm trying to rock like how much of the a6 that are plugged

in around the world or owned by chinese companies or individuals who i mean just being in the industry that's the way the chinese work they point their hash rate at chinese mining pools um and yeah and it's a shame and it's a shame that you know uh pool and went under right 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 um so it's a shame that that all these folks were demanding fixed paper 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 the deep balance sheet

yeah i'm trying to think maybe you get a k and c miner big 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 gonna fire you and you know all the miners you know we need uh 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 maybe hong kong maybe we come to an agreement in hong kong or something like that clearly in austin because where all the miners are right somewhere in west texas we'll pick a pick a random town somewhere yeah these are messy problems these are the problems it's hard in the short term in the long term miners just need to start testing stratum b2

we need to start moving to these other solutions yeah i'm telling you this is going to get released and everybody's gonna be like he's fear-mongering because he wants shred and b2 um he's incentivized well you know they can keep saying that right up until bitcoin changes proof of work and then they're going to be real sad yeah yeah there's been a lot of on the uh the mining pool side not only with this centralization of block production templating but yeah like with the with the out-of-band transactions i mean even outside the chinese mining pools you have it's not fuckery it's a business model but it is a new interesting variable within the mining industry slipstream

from marathon we have mempool.space's transaction accelerator which i think is preferable to so far those things haven't so far those things haven't minted 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 relay policy a little more relaxed. You know, Bitcoin Core tends to be very relaxed. 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 template.

So Bitcoin Corp prefers small transactions because that's the only way they can build an optimal block template. But, you know, these things will have to change as demand from users changes because, you know, Bitcoin Corp will have to create, you know, has to create good block templates. There's no other way around it. um 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 that's good to know all right everybody needs to go test stratum v2 i think it'll be in beta for what six more months maybe longer well it depends on when people get around to testing it you know if nobody tested it'll sit in beta forever if people actually start pointing hash

power at it and testing it and saying like yep i can select my own custom work i can mine on demand pool and i found you know however many shares then it'll be at a beta in a month you know so it's a question of people using it should we publicly shame some people right now uh if you have people you want to shame it sounds good to me i've got cormit cormit let's test it out riot let's test it out yeah yeah you know get off zero cathedral sit on the board i'll bring it up a cathedral all right you need to test it um yeah it's uh i think that's not a problem with strategy but i think it's taken so long and maybe there is

an error of is it really here because it's been talked about for so long like yeah is this just bullshit we had foundry implement that's the other thing too foundry is like we have strata v2 live and it's like yeah that's just the cryptographic nature of

sending hashes to the pool yeah yeah and to be clear I'm not actually 100% sure where they are on that so that's that's right and then brains also announced that they have been brains os at least maybe it was brains yeah but that is that is only the the standard block instruction form that's not the uh the custom work selection version yeah another freaking bit mean they just announced

that uh or they didn't even announce that they just released their latest firmware which makes impossible to backdoor so something like brains os um right or other third parties more lockdown next next version they're going to tie it to their pools can only mount on their pool you know you think so that would be i mean that's always been there that's always been their go-to you know we want more users on our pools so they can extract fees eventually lock people in yeah that would be interesting that would be a misstep can we give luckily uh within your uh corporate uh umbrella it's a good announcement to see today the uh yeah the block mining three nanometer tape out that's good me that we got audio lane audio line as well

obviously a micro bt which i'm partial towards i love their machines run them personally um intel maybe back in the game yeah but main need to check and it is weird because bitmain you know the mining industry would not be as robust as it is without bitmain historically but bitmain has been extremely antagonistic and scummy in a lot of ways yeah all right we do it every episode that we record uh you were most optimistic two years ago and i seem least optimistic percentage of Bitcoin succeeds right now? Three, three, three percent. 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 strategy, too. But there's a lot of miners who it's going to take a lot of work to reach. And, you know, we got to get up zero. We've got to get some of these bigger miners in the West getting 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, and whatever.

We've got a long way to go to make Bitcoin decentralized. And is there a forcing function once Stratum V2 is adopted by a certain percentage of the network where it becomes, not uneconomical, but less economical to run Stratum V1? Not really. No, I mean, it doesn't change a lot about the economics. You know, I would strongly encourage ISPs out there to go start stealing hash power because Stratum V1 is insecure and your ISP could be siphoning off some hash power. So I'd strongly encourage that. If you're an ISP and you're in Kazakhstan, go steal some hash power, make some free money. But no, sadly not.

Okay. Maybe that's what we need, the attacks from the ISPs to force decentralization into mining there. All right. Let's do it. Let's do it. We're withholding, so we bankrupt all the fixed paper share pools. Go withhold some blocks.

Go bankrupt the fixed paper share pools. Matt came on and shows violence. today we're gonna block withhold the isps are gonna attack and hash rate jack we're gonna change the hash function uh we're gonna find miners yeah let's do it all right well i knew this was gonna be this type of episode when you uh when you dm me last week i had a feeling sorry had to happen how's everything else going life's good life's good you look good can't complain it's nice in new york starting to be spring yeah i'm bummed i missed you last week missed you by a couple days yeah yeah well i had a event in miami sadly i missed a bunch of the having parties too

but oh well you're fine next month we're celebrating our own demise you know it would be poetic yeah all right well thank you for uh keeping us on our toes um and if you're a minor listening out there think about this uh long-term viability of your business is that is at risk because uh bitcoin is a very important project and if push does come to shove uh the nuclear option is there and it will be hit if it needs to be hit nobody wants to hit it let's not let it get to that point get off your ass stop focusing on the energy stuff myopically uh we've got a network side of things that that is yeah and it doesn't take many resources to deal with the network side of things you know

So it just takes a few hours a week from your ops folks. You can figure it out. Yeah. All right. Well, I'm going to go text some miners. Maybe write a newsletter. I think that's what I wrote a newsletter about today. And then we'll post this tomorrow.

Let's get the message out there. Cool. All right. Thank you. It's great seeing you under these very depressing circumstances, but we've got to get it out there. Yeah. Yeah, we do.

We've got to get off zero. All right. get off zero we'll fire the miners peace and love tiki