Breaking ChatGPT’s Bitcoin FUD #8: Mining Centralization – part 1

Breaking ChatGPT’s Bitcoin FUD #8: Mining Centralization – part 1...

Breaking ChatGPT’s Bitcoin FUD #8: Mining Centralization

Vlad Costea's "Breaking FUD" series continues with the 8th "top threat" to Bitcoin according to ChatGPT. There are too few mining companies, and they can conspire to dominate and change Bitcoin! That is what they want you to think. Let Vlad soothe your worries. 

On to the segment from the e-magazine "BTCTKVR 3: Breaking FUD", released May 2023. I'll keep posting the rest of this e-magazine over the coming days.

"Breaking ChatGPT’s Bitcoin FUD #8: Mining Centralization – part 1


According to ChatGPT, a small number of mining pools control a large portion of the mining power on the Bitcoin network. Such a scenario could lead to centralization of power and decision-making. First of all, it’s nice to see that the AI model introduces a little bit of nuance by suggesting that the attack described is hypothetical. “Could” is a tad softer than “can collaboratively centralize” or any other phrasing which puts emphasis on the consequences of this threat.

Secondly, it’s interesting that ChatGPT doesn’t mention the 51% attack which reorganizes recent transactions and can theoretically rewrite the history across multiple blocks. Maybe that the programmers didn’t spend enough time training it to FUD Bitcoin (and shill the Orwellian WorldCoin which Open AI endorses as an alternative), or maybe that the vagueness was left there on purpose. Regardless of semantics, let’s break this FUD.

In order to challenge the FUD about mining centralization in Bitcoin, one must look at historical, technical, and game theoretical examples. Because the concernsdatebackto2011 and they were never really validated – as a blockchain reorg attack takes a lot of coordination, and even if the attack takes place it’s financially costly and socially difficult to sustain.

As described in the previous article, which debunked some dishonest concerns about Proof of Work mining and energy consumption, there have been previous moments in Bitcoin’s history when users expressed fear of witnessing a 51% attack. What is a 51% attack, you say? It’s a situation where one mining entity reaches a simple majority of hash rate and decides to reorganize recent blocks and steal money from transactions. It’s not about a majority of participants, but a majority of processing power (or hash). The reason why a successful 51% attack never happened on Bitcoin is that mining pools are not singular entities that can act on behalf of all participants. Also, at least up to this point, the miners have always found it more profitable to play by the rules and collect the Coinbase rewards.

To recap, here are the moments in history when a mining pool reached a dangerously high hash rate – one which could theoretically enable them to launch attacks against Bitcoin:

– in July 2011, Deepbit surpassed the 50%mark: an event that inspired Bitcoin Talk forum user bcearl to post about it and tell others “Don’t panic, but watch carefully!”. In less than 2 years, Deepbit was already irrelevant and bitcoiners migrated towards new and more efficient pools;

– in September 2013, Bitcoin Talk forum user mechs pointed out that BTC Guild might become a “51% attack risk”. Funnily enough, the first reply by Nancarrow was “Whoa man, deja vu”. Bitcoin Core developer Greg Maxwell also tuned into explain why the concerns are unjustified. But the most prophetic answer came from a user named johnyj, who suggested that GHash.io poses a greater risk because the hardware manufacturer is also the biggest operator;

– in January 2014, the rise of GHash.io has made Bitcoin Magazine co-founder Vitalik Buterin lose faith in Proof of Work mining. Around the same time, then- Bitcoin Core developer Peter Todd took to Reddit to announce that he sold half of his bitcoins to mitigate the risk. But in March 2014, the community coordinated a massive DDoS attack against GHash. In the aftermath, the pool shut down its cloud mining service and quickly faded into obscurity as it was no longer accepting new members. Only GHash’s exchange service, CEX.io, is still around today;

– in 2017, bitcoiners would once again battle against a large mining pool named Bitmain. Like GHash.io, Bitmain was manufacturing chips that the rest of the industry was using. But what Bitmain did was to develop and enable the so-called ASIC boost, a special type of software which pushes the performance of their mining devices. Then, when they figured out that Bitcoin’s SegWit upgrade would nullify their ASIC boost, the company shifted towards supporting Bitcoin Cash – the big block version of Bitcoin, which failed to get enough traction. Bitmain’s support for BCH resulted in a loss of dominance for their two mining pools: BTC.com and AntPool. So while bitcoiners were concerned that Bitmain may get too big and attack Bitcoin, bad management made the company shrink and ultimately diminished its role in providing hash rate. However, Bitmain is still the biggest manufacturer of SHA-256 ASICs for Bitcoin mining and most other pools (as well as individual contributors) use their hardware.

This short history lesson is meant to help us understand that Proof of Work mining is dynamic and no entity is too big to fail. But since the concept of a mining pool has been brought into discussion so many times, it’s important to explain what it is and how it works."

Vlad continues his exploration of Bitcoin mining. See you in part 2 of 3 on Bitcoin Mining Centralization FUD.

I'm Charles Polanski and I seek to turn the Bitcoin-curious into Bitcoin investors and enthusiasts.

Thanks to Vlad for making this excerpt available to freely spread.
Find him on Twitter: @TheVladCostea
"Your Bitcoin influencer's influencer."
Host of the Bitcoin Takeover Podcast
Writer of the open source @btctkvr mag.
Check out his work: http://linktr.ee/btctkvr