Replies (82)
TL;DR: miners need to grow a pair of balls
Thank you so much for this. I am trying to zap you but cannot. This post most certainly deserves a fat zap.
Public companies will never be able to do the right thing as
@jack elucidated on Citadel Dispatch with
@ODELL . This is a much bigger problem than anyone wants to reckon with.
There is a separate sub-issue here of fiat money basically requiring access to capital markets to survive. This is a much longer conversation that needs to be had as well.
NAILED IT. 🎯
BTW ZAPS ARE FAILING TO YOUR ALBY WALLET.
CONSIDER SWITCHING TO:
npub.cash
A nostr native Lightning Address for everyone
Thanks for the awareness. Sounds like a pretty unacceptable trade off.
Will protest by selling my HUT/Cleanspark/BITF shares until this is rectified!
🙏
All these miners will go out of business.
100% of them.
centralisation of mining pools is the iceberg for Bititanic, except we have the chance to take action before it's too late
Worth thinking about ...
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
Great article. Check your LN node or zap wallet. Zaps to you keep failing.
Great post, would love to hear the thoughts from big miners why they do not at least just give it a try and see if they are stacking more with Ocean. Which has been tested a couple of times and Ocean always wins the race
👀👀👀
"miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares."
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
What a great article! Wish I could zap you!
Mining operators largely operate through debt, so the consistency of payout so they can service their debt is more important than the actual profit in many cases. After all, a missed payment means death. They are, in other words, fiat operators.
Many of them frankly need to die and new businesses that operate from savings can take advantage of Ocean's better payout system.
View quoted note →yep.
yep,yep,yep.
Anyone who wants to do something about this should start mining with Ocean and use Datum. Every miner creates their own template under this scheme, making censorship nigh impossible.
ocean.xyz
great post!
thanks for alarming the situation 🫡
But how could they afford to be XX% less profitable than their asian/african competitors that dgaf about compliance? Wouldn't they get pushed out of the market sonner than later if the difference is really that large?
No, it's nothing like that simple.
GERMAN TRANSLATION 🇩🇪 🇦🇹🇨🇭
* Foundrys Dominanz: Wie Compliance und Varianzreduktion Bitcoin-Mining zentralisieren – und warum Miner trotz hoher Kosten bleiben *
Wir stellen also regelmäßig fest, wie unakzeptabel groß Foundry geworden ist, und es wäre gut, wenn Bitcoin-Enthusiasten im Allgemeinen verstehen würden, warum wir an diesem Punkt angelangt sind.
Zuerst wollen wir darüber sprechen, was Pools tatsächlich tun, angefangen bei der Theorie bis hin zur Praxis.
Theoretisch machen sie keinen Unterschied – sie reduzieren lediglich die Varianz.
Anstatt $.X pro Jahr zu verdienen, verdienst du $.X/365 pro Tag.
Das ist viel konsistenter und macht den täglichen Betrieb einfacher, und es ist klar, warum jemand das tun möchte – vorausgesetzt, es handelt sich um einen kleineren Miner, der nicht in der Lage ist, häufig genug Blöcke zu finden, ohne sich mit anderen zusammenzuschließen und die Belohnungen zu teilen.
Dies könnte so wünschenswert sein, dass man sogar einen Anteil an den Koordinator (Pool) zahlt, weil der Service so wertvoll ist.
Um noch einen Schritt weiterzugehen, ist das mit Abstand häufigste Auszahlungsmodell, das ein Pool verwendet, FPPS – dies verstärkt den vermeintlichen Vorteil, der hier so überzeugend ist. Es steht für "Full Pay Per Share", was theoretisch bedeutet, dass Miner auf Basis von Shares (etwas, das sie mehrmals pro Minute einreichen) einen hochgradig vorhersehbaren Betrag erhalten.
Das bedeutet, dass du nicht nur mit der Lotterie-Varianz (das Warten, bis du einen Block findest) oder sogar der Standard-Pool-Varianz (das Warten, bis jemand im Pool einen Block findet) umgehen musst, sondern stattdessen mit einem Pool minest, der dir mehrmals pro Minute Einnahmen beschert, unabhängig davon, ob der Pool Blöcke findet oder nicht.
Dies ist eine Varianzreduktion in einem solchen Ausmaß, dass das Produkt unglaublich teuer wird, weil die Pools sich nun in einer Position befinden, in der sie Miner für Blöcke bezahlen müssen, die möglicherweise – und sehr oft nicht – gefunden werden.
Dies wurde zweifelsfrei demonstriert, als OCEAN (ein nicht-FPPS-Pool) seine Zahlen veröffentlichte und in einigen Fällen im ersten Betriebsjahr FPPS um über 30% übertraf.
*Hinweis*: Dies ist KEIN Beitrag, in dem es heißt: "Du solltest bei OCEAN minen." Ich versuche lediglich zu erklären, warum Miner die Entscheidungen treffen, die sie treffen, denn das scheint fast allen zu entgehen.
Also entscheiden sich Miner offenbar für eine Varianzreduktion in einem Ausmaß, bei dem sie auf jeden Fall bezahlt werden wollen, unabhängig davon, ob Blöcke existieren oder nicht, und das bis hinunter auf die Share-Ebene.
Aber hier kommt der Punkt, an dem die Diskrepanz zwischen Theorie und Realität deutlich wird.
Fast alle Miner bei Foundry haben absolut keine Notwendigkeit für diese Art von Varianzreduktion – oder überhaupt für irgendeine.
Die börsennotierten Miner, die Foundry nutzen, sind alle in der Lage, mehrere Blöcke pro Tag ohne jeglichen Dritten zu finden, was mehr als genug ist.
Wie bereits erwähnt, ist FPPS ein extrem teures Produkt, das logischerweise nur von einem Miner benötigt würde, der mit stündlichen Energierechnungen konfrontiert ist und nur etwa 100 Petahash hat. Wiederum ist der typische Foundry-Miner 100-mal so groß und kommt am unteren Ende auf fast 10 Exahash.
Wenn Foundry also ein bestimmtes Problem – Varianz – löst und dafür ein Vermögen verlangt, und seine Hauptkunden Miner sind, die selbst im Lotterie-Modus mehrere Blöcke pro Tag finden könnten, ohne die Kosten von FPPS zu tragen, was um alles in der Welt tun sie dann?
Die naive Antwort ist, dass sie die Mathematik nicht gemacht haben. In einigen Fällen weiß ich sogar, dass das stimmt. Du bist ein riesiger Miner und schließt einen Deal mit Foundry ab – sie berechnen dir eine Gebühr von 0,1%, und du denkst, das entspricht in etwa dem, was du zahlen würdest, wenn du den Mittelsmann ganz ausschaltest, also lohnt es sich.
Aber bei FPPS ist die Gebühr nie die Gebühr. Das ist wie das Schild am Flughafen, auf dem steht "0% PROVISION", aber du bekommst einen Wechselkurs, der etwa 14% schlechter ist als der Marktkurs. Wohin fließt das Geld?
Ich glaube nicht, dass die meisten Miner diesen Fehler tatsächlich machen, zumindest nicht alle.
Es ist an der Zeit, den wahren Grund hier zu erklären.
Compliance durch Stellvertretung.
Und das ist der Schlüssel, den man verstehen muss.
Geschichte: Es war einmal ein Pool namens GHash(.)io, der über 40% der Hashrate erreichte (was Foundry inzwischen regelmäßig tut), und die Miner flohen instinktiv, um das Netzwerk zu schützen. Man kann einfach nicht zulassen, dass eine einzelne Entität 50% der Blöcke, die der Kette hinzugefügt werden, oder etwas in der Nähe davon produziert.
Warum tun Miner das heute nicht? Sind sie so süchtig nach Varianzreduktion, obwohl die Miner, die Foundry nutzen, durchaus in der Lage sind, ihre eigene Varianz zu reduzieren, selbst wenn es sie ein Vermögen kostet?
Wieder einmal muss die gesamte Branche verstehen, warum sich die Geschichte hier nicht wiederholen wird, und hier finde ich die größte Menge an Selbsttäuschung und Unehrlichkeit in dieser Branche.
Compliance durch Stellvertretung war 2016 kein Thema. Zumindest nicht für Miner.
Seitdem ist jemand aufgetaucht und hat das, was für die Mächtigen völlig inakzeptabel ist – Bitcoin-Mining – in eine völlig bereinigte, zensuranfällige Hülle seiner selbst verwandelt – und *das* ist die wahre Motivation dafür, dass "Miner" diese exorbitanten Gebühren zahlen.
Compliance ist neu. Und es ist ein Faktor, den die Leute nicht berücksichtigen.
Wenn wir darauf hinweisen, wie prekär die Situation geworden ist, kommt die typische Antwort: "Wenn Foundry jemals <etwas Schlimmes> tun sollte, dann werden ihre Miner einfach gehen."
Es ist an der Zeit, diese Bewältigungsstrategie zu begraben.
Wenn ein Miner durchaus in der Lage ist, seine eigene Varianz so weit zu reduzieren, dass er selbst zuverlässig mehrere Blöcke pro Tag findet – warum nutzt er überhaupt einen Pool? Vor allem, wenn dieser Pool ein Vermögen kostet?
Oder grob gesagt: Wenn es nicht überzeugend genug ist, Foundry wegen eines offensichtlichen Geldverlusts zu verlassen, dann wird die Gefährdung von Bitcoin auch kein Grund sein.
Die wahre Motivation ist alles, was zählt, und sie ist überwiegend einfach Compliance. "Miner" von beträchtlicher Größe wollen zunehmend nichts mehr mit Bitcoin zu tun haben und möchten, dass ihre gesamte Hashrate von rohen Bitcoins, die frisch aus der Blockchain kommen, in ein schönes, sauberes Produkt umgewandelt wird, das ihre Buchhalter und Anwälte tolerieren können, unabhängig von den Kosten.
Um die Gegenposition zu meinem Argument einzunehmen, gibt es natürlich Kosten, wenn man sich direkt mit Bitcoin auseinandersetzt, wie es MARA tut, und ich möchte das nicht verschweigen, aber ich glaube nicht, dass diese Kosten auch nur annähernd den enormen Einnahmeverlust rechtfertigen, der durch das extreme Overkill von FPPS entsteht.
Dies ist der einzige Bereich, in dem ich Widerspruch von jemandem aus einem der relevanten Unternehmen akzeptiere, da es möglich ist, dass ich einfach falsch liege.
Die folgenden Unternehmen – BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark und eine Handvoll anderer – zahlen meines Wissens alle ein Vermögen für den kombinierten Vorteil der Varianzreduktion (die sie absolut nicht benötigen) und der Compliance durch Stellvertretung.
Wenn jemand von einem dieser Unternehmen mir erklären kann, warum ich falsch liege und warum, falls/wenn die Größe von Foundry dazu führt, dass sie Zensur oder einen anderen Missbrauch des Netzwerks betreiben (verdammt, bereits die Anforderung von KYC und regelmäßige Inspektionen von Mining-Einrichtungen sind inakzeptabel, und das ist bei Foundry-Minern seit Jahren der Fall), warum sollte dann jemand glauben, dass ihr zu einem anderen Pool wechseln oder den Mara-Weg einschlagen würdet?
Derzeit glaube ich, dass Foundry seinen unaufhaltsamen Aufstieg zur magischen 51%-Marke, die wir alle fürchten, fortsetzen könnte, und die neue Bewältigungsstrategie wird sein: "Nun, sie haben <etwas Schlimmes> noch nicht getan", und wir werden einfach die Torpfosten verschieben, was ein schlimmes Ding ist.
Im Moment heißt es: "Es ist nur KYC", "Es sind nur obligatorische Inspektionen" und "Es ist nur verlorener Umsatz."
All das ist inakzeptabel. Als nächstes kommt: "Es sind nur Transaktionen, die mit Russland/Iran in Verbindung stehen", und die Aktionäre börsennotierter Bitcoin-Miner werden Zensur aufgrund dieses Kriteriums wahrscheinlich nicht als etwas ansehen, worüber man sich Sorgen machen müsste. "Warum hasst du Amerika??"
Die alte Bewältigungsstrategie, dass "ein anderer Miner sie einfach einschließen wird und ihr Geschäft überleben wird, während die zensierenden Miner sterben", ist völlige und absolute Selbsttäuschung.
Fast 100% der Einnahmen aus der Kette sind Subventionen. Transaktionsgebühren sind völlig irrelevant. Und wenn wir denken, dass die US-Pubcos alle freiwillig Insolvenz anmelden werden, weil sie ein paar hundert Dollar pro Woche verlieren, weil sie Blöcke gemint haben, die UTXOs auf der schwarzen Liste zensiert haben, dann täuschen wir uns selbst.
Ich wiederhole: Miner sind bei Foundry, weil Compliance zunehmend alles ist, was zählt. Dies hat zu einer enormen Zentralisierung der Template-Konstruktion geführt, die bei ~30% zu einem echten Angriffsvektor wird und seit langem konsequent weit darüber liegt. 51% ist ein Meme, und meiner Meinung nach nicht stark genug, um Veränderungen zu inspirieren, wenn es tatsächlich dazu kommt. Die Frösche kochen bereits, und niemand kümmert sich.
Seien wir ehrlich. Keiner der Miner bei Foundry wird in absehbarer Zeit gehen, aber das varianzreduzierende Produkt, das sie anbieten und das so einfach anderswo repliziert werden kann, ist nicht der Grund, warum sie tun, was sie tun.
Foundry ist der einzige Bewohner innerhalb des regulatorischen Grabens, der Bitcoin-Mining in Amerika ist, und ich halte das nicht für trivial zu replizieren.
Und der Grund, warum ich die Alarmglocken 10.000-mal lauter läuten möchte als bisher, ist, dass die derzeitige US-Regierung eine Kampagne geführt hat, in der sie ausdrücklich davon spricht, Bitcoin in den USA zu zentralisieren.
Der Satz "Wir werden alle Bitcoins in Amerika herstellen" ist genau das Schlimmste, was man angesichts all dessen, worüber ich in diesem Beitrag gesprochen habe, hören möchte, und nicht nur wird er von Bitcoinern nicht abgelehnt, sondern er wird als etwas Gutes gefeiert.
Great note Fren
Interesting take
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
Jor u should talk about this on ur channel
Great explanation. I would zap if you had set up a Lightning address.
Off topic question: what laptop are you using? I’m in the market for a new one.
Can you put this on the List?
Would zap
NOW THAT IS CONCERNING
highly zappable
Can't zap you my man. Channel lacks incoming liquidity?
NOS2X BROWSER EXTENSION. (NIP-07)
"Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough."
can confirm! I work for a miner on foundry that would easily mine ~7 blocks a day on their own.
View quoted note →It's insane that compliance is this big of an issue.
I had heard an interview where in order to comply the miners don't want the #Bitcoin to actually touch their wallet. How crazy is it that a Bitcoin miner prefers NOT to have self custody of their Bitcoin?
I think a lot of us are pretty on board with what the centralisation of mining pools is, and where it can lead.
So shouldn't the thought discussions now be around how to convince the miners that further de-centralisation is not only important, but fundamental to their survival ? And then start building a strategy to move them to independence, or mining with Ocean or similar.
Who holds the power to change things ? are what their incentive structures. Could you get them round a table to discuss and discover ?
*what are their incentive structures ?
(typo correction)
But
@PODCONF told me compliance is defiance.
All joking aside great post Mechanic and what is the logical course of action to fix this?
Fantastic post. I think in the medium-term, more "compliance" pools will pop up, and in the long-term, mining will get completely atomized by lottery miners and heating devices.
After hearing you speak in Lugano, i switched to Ocean.
Can’t zap you, hää?!
Thanks for taking the time to explain the issues underpinning mining centralisation. This is a critical matter for us to understand and address.
Thanks for sharing this,
@Bitcoin Mechanic . I’m with you 100%. Sadly, few in the mining space, especially institutional miners, embody the Bitcoin ethos. They want the money before the values. Any miner pushing for centralization in the US ,or anywehre else, is not a pure Bitcoiner imo.
🟠Sorry for the long list of inquiries. your article was so detailed and rich that it sparked a lot of thoughts and questions. Hoping to get your answers!
On Compliance and "Censoring Miners Will Die"
🧑🔧 Your point: “The old cope of ‘another miner will just include them’ is delusion.”
🔸 My take: I agree. The idea that censoring miners will just die off is wishful thinking. But currently, we do see Russian-backed miners (e.g., ViaBTC and others) taking care of some blacklisted UTXOs.
🧑🔧 Your point: “Miners are with Foundry because compliance is increasingly all that matters.”
🔸My take: Spot on. But let’s be honest—what drove miners to Foundry in the first place wasn’t just compliance. It was their high-time-preference, Wall Street-style obsession with quarterly results. Classic fiat brain thinking, right?
Follow-Up Questions
1⛏️ Why 100 PH?
🧑🔧 You mentioned 100 PH as a benchmark for when variance reduction becomes critical. That’s just 0.0127% of today’s hash rate—super low. I’ve always thought a better threshold would be when a miner controls between 0.5% and 1% of the network (4,000–8,000 PH/s).
🔸What’s the reasoning behind 100 PH being the magic number in your view?
2⛏️Threshold for Starting a Private Pool
🧑🔧 If 100 PH is enough to not rely on a pool,
🔸what do you think is the no-brainer threshold for a mining company to justify running its own pool?
🔸Is it purely about operational costs, or are there other barriers?
3🧑🔧 "Transaction Fees Are Neither Here Nor There"
🔸Can you expand on this?
🔸Would a fee-driven economy (post-subsidy) make compliance-driven mining even more dangerous? [we wont be witnessing it but just wondering]
4⛏️Template Construction Centralization at ~30%
🧑🔧 You said centralization of block template construction is already a genuine attack vector at ~30% hash rate.
🔸Is this linked to the weird, seemingly “cleaned” blocks we’ve been seeing lately?
🔸What tactics could exacerbate this attack vector?
🔸How cqn they mitigate it? I’d love to dive deeper—where should I look for resources?
5⛏️Frogs Boiling, But When Do They Burn?
🧑🔧 You mentioned the boiling frog analogy, but when do they burn? Is there a tipping point where even the most compliance-addicted miners will have no choice but to face the consequences?
6⛏️What Would a Cleanup Look Like?
If miners won’t change their behavior voluntarily, what kind of event would trigger a mining sector “washout” to force realignment?
Would love your thoughts on these points. Appreciate the deep dive you’ve done. Hopefully sounding the alarm on #nostr is a more impactful way.
It seems quite worrisome
What’s stopping the big miners (RIOT, MARA, etc) from running their own internal mining pool?
Its so easy to setup mining with Ocean / DATUM even I can do it.
TL;DR:
Foundry’s dominance in Bitcoin mining isn’t about reducing variance, as most of its large-scale clients don’t need that. Instead, miners use Foundry because it helps them comply with regulations, making Bitcoin mining more palatable to lawyers, accountants, and shareholders. This “compliance by proxy” comes at a high cost, centralizing mining power and creating risks for Bitcoin’s decentralized nature. As Foundry’s share of the network grows, it raises concerns about censorship and control, yet miners stick with it because it simplifies their operations in a regulatory-heavy environment—even at the expense of Bitcoin’s core values of decentralization and resilience.
How do we fix this my brother?
Do you think there will eventually be a hard fork of the compliant and the non-compliant chain?
I would just love to see the actual holders make the decision on the strongest chain by slowly dumping all of their compliant coin for the non-compliant one.
Eventually miners would be forced back to the non-compliant chain. Am I too optimistic to think this would happen?
Kind of like how people don't accept and pay people in bitcoin due to the regulatory burden.
Not everything can be solved af the protocol/technical level unfortunately. Bitcoiners need to gradually assert themselves as an unwavering political force in the society they live in and bring about regulatory change. It seems one of those situations where what brought us here won't get us there (everything IMHO obviously)
My favorite solution: add more privacy at the protocol level. All the compliance miners will leave.
Add more privacy at the protocol level. All the compliance miners will leave.
great read. i understood some of it. they are all just proxies for bitmain eating all the blocks.
I’m sorry that happened to you or I’m truly happy for you.
But seriously you nailed it the problem but miss the root cause. I’ve never met a a single miner in the space who’s rushing to be compliant. FPPS pools make mining easier than any option that offers block construction or higher payouts with higher variance. This isn’t some slow, malicious attack on Bitcoin, it’s a superior product experience. Complacency and comfort are the real risks to bitcoin censorship resistance, not compliance. Quit bitching and build a better product that doesn’t expose me to financial or legal risk as a mining operator.
Dumb.
The desire to do so.
You ever try paying an electric company with Bitcoin?
Tell me you don’t understand the distribution of hashrate without saying so.
Shit privacy, and the product offering from other pools is better.
lol
Nah
This is a half bad take. The incentives are broken absolutely, but No one is eagerly complying with daddy OFAC. It’s just way easier to use Foundry or Luxor as a business than it is to build my own block template with a less private pool option.
this is IMO of far greater importance than any discussion about OP_CAT. Let's fix mining.
View quoted note →Running more than 100.000 energy efficient solominers like bitaxes at plebs homes across the globe?
Each new #solominer running and actually solomining helps a bit more i think but i am no expert just started myself a few weeks ago.
If the pools and industrial miners won't do it we have to decentralize the networks hashrate by ourselves bit by bit it seems.
Do you think this would help? #bitaxe
nostr:npub1k8s3skyy5mg5h07w8zvuk5lgrqadmejz7fjdpl60zaznw8sxzdxqxm6y88nostr:npub18as53mh65p3wh4dzta4gf25yzvkyjwjfawdsqtyvqmnxunst7thq6rhf8r
This is so important.
The Bitcoin community and nostriches should pull their head out of the nground.
In El Salvador you CAN pay with #Bitcoin
But that's not the point. The point is they don't want to touch it at all.
@Bitcoin Mechanic tagging you as you might have missed the above due to the long number of comments.
nevent1qvzqqqqqqypzpwy9rgrdl4uafr7ry535590f534r9gyc92prk4xdlqj3fwd3yzapqy88wumn8ghj7mn0wvhxcmmv9uq3camnwvaz7tmjv4kxz7fwdehhxarjv9exzcnfvyhxxmmd9uq32amnwvaz7tmjv4kxz7fwv3sk6atn9e5k7tcqyz59zjjcwn5penndw4qe8gcydslp67tn3sqzjaffrkxf456xk8uts9tam9p
Wrong. OP is talking mostly about public miners in the US. Most of their obligations are in dollars. Most of them are making the Microstrategy play by holding Bitcoin on their balance sheet. They want Bitcoin as much as the next pleb, they just have different legal obligations because the existing legal/financial framework forces their hand.
Correct, but they're trying to NOT hold Bitcoin directly from the chain. They want to buy it later instead. Because they don't want the tax liability of getting it direct.
Seems backwards to me Mr boring
That was also my conclusion. Will get more machines running soon as well 👍
What are you even saying? Mined sats are better than purchased sats? That’s retarded. They’re fungible for a reason. Also, how do you know what their hodl strategy is with respect to when they sell what?
Sorry let me be more clear:
There are a few big miners that don't use say, ocean, because they don't want direct custody of the #Bitcoin as part of the block subsidy because of the tax implications. They WANT FPPS because they can sell it immediately when taking custody from the pool and not have the 100 block delay. Their compliance, doesn't allow that gap. They can then go back later and buy #BTC with any profits, instead of mining directly. Which is stupid when you think about it.
No, that’s misinformed. There are a number of reasons that make ocean not super appealing as a large scale miner. When all of your obligations are in dollars, it makes a lot of sense to liquidate then buy in separate transactions for the sake of accounting. Maybe not the most efficient, but it’s not your sats. If you’re mining on Ocean enjoy the extra fee revenue if you happen to hit a block.
It's not misinformed. The point I'm making is they DON'T want it straight from the blocks themselves. Which is being a Bitcoin miner but not liking the Bitcoin payout. Which is weird to me. That's the only point I'm trying to make.
You're part of a system but don't like the way the system pays you, so you so accounting magic instead.
This is why they go for the compliance bullshit instead.
It seems to me that the only real way out of this is to decentralize bitcoin mining more. We have to plebicize bitcoin mining. Make Bitcoin Pleb Mining Great Again. And we have to do that with private, pleb-friendly, energy sources like coal, wood, solar, etc.
Does anybody know of good sources of info for coal pleb btc mining?
I say Pleb Mining with private energy sources like coal, wood, solar.
It doesn't even have to be profitable; just less expensive than the fees at the least expensive bitcoin ATM.
Spot on. Fuck Foundry
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
And it is not only Foundry.
Haven't you heard about the antpool family?😉
Some pools are proxies for antpool.
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
Well said
@Bitcoin Mechanic I always appreciate your analysis! Does Ocean have plans to provide an app or web interface like Braiins and others?
Good for thought. It's a worry
It sounds that the compliance motivation should be really a hypothesis as there's nothing backing it. Unless
@ODELL can confirm it stating that's the insight coming from miners?
Fiat may be an explanation here. Miners may want to get the most from the fiat printer so may use leverage as much as they can. When they are leveraged they may not be able to have such variance in their income. They'd need more savings for that. They already need some to cover variance in bitcoin and hashrate prices (some of them also energy prices). Maybe they also don't like to be put in a position when suddenly they're forced to sell bitcoin. It may make sense financially to take on more cheap fiat debt to grow and seize opportunities at the cost of lower bitcoin earnings short-term. Bitcoin standard fixes that.
Also the claim that on FPPS you get 20-30% percent less is new and not strongly verified. Currently we just need to take Barefoot Mining word for that although they haven't even released concrete data. Not even which FPPS pools the comparison was done against.
It may be as well that miners focus on physical infrastructure and access to energy whilst missing the point that running own software infrastructure shouldn't be outsourced.
Lastly why do you assume that Foundry hashrate share will grow? It hasn't grown in the last two years.
Mining built into appliances we use everyday
Great. Finally everyone can come back and zap you for this masterpiece. Thank you!
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
⚡This must be the most underzapped post. His wallet failed, but now it's up again.
@ODELL @clr @Sven @Gavin Green @npub1r03d...2qfw @Astaroth @ChrisThanks for pointing out!
Bitcoin Mechanic
So we're regularly noticing how unacceptably large Foundry has gotten and it would be good if Bitcoiners in general understand why we are where we are.
First, let's talk about what it is pools actually do, starting from the theoretical going all the way the practical.
In theory they make no difference to anything - they simply reduce variance.
Instead of earning $.X per year, you earn $.X/365 per day.
This is far more consistent and makes day to day operations easier and it's clear why someone would want to do this - assuming they're a smaller miner who is not capable of finding block frequently enough without pooling and splitting rewards with others.
This might be desirable to the point where you'd even pay a split to the coordinator (pool) because it's that valuable of a service.
To take it further, the absolute hands-down most common payout model for a pool to use is FPPS - this doubles down on the supposed benefit that is so compelling here. It stands for Full Pay Pay Share which -in theory - means that miners get paid on a share to share basis (something they're submitting multiple times a minute) a highly predictable amount.
This means you not only have you abandoned dealing with lotto-variance (waiting until you find a block) or even standard pool variance (waiting until someone on the pool finds a block) but instead you're mining with a pool that grants you earnings multiple times per minute regardless of if the pool is finding any blocks or not.
This is variance reduction to such an extreme that the product becomes unbelievably expensive because pools have now put themselves in a position where they must pay miners for blocks that might - and very often don't - happen.
This was demonstrated beyond doubt when OCEAN (non-FPPS) released its numbers and they outperformed FPPS by over 30% in some cases during its first year of operation.
*Note: This is NOT a "You should mine on OCEAN" post. I am simply trying to explain why miners are making the decisions they are because it seems to be eluding almost everyone.
So miners are apparently opting for variance reduction to the point where they want to get paid no matter what for blocks that may or may not even exist with resolution all the way down to the share level.
But here's the part where the disconnect between theory and reality comes in.
Nearly all the miners on Foundry have absolutely zero need for this kind of variance reduction - or indeed any at all.
The publicly traded miners that make use of Foundry all have the ability to find multiple blocks a day without any third party whatsoever which is way more than enough.
As mentioned already, FPPS is an extremely expensive product that logically would only be required by a miner faced with 24 hourly energy bills who only has 100 Petahash or so. Again, the typical Foundry miner is 100 times the size of this coming in at almost 10 Exahash at the smaller end.
So if Foundry solves a particular issue - variance - and charges a fortune to do it, and its main customer is miners that could lotto-mine and find multiple blocks a day without incurring the costs of FPPS then what on Earth are they doing?
The naive answer is that they haven't done the maths. In some cases I actually know this to be true. You're an enormous miner and you do a deal with Foundry - they charge you 0.1% fee and you think that's equivalent to if you cut out the middle man entirely pretty much so it becomes worth it.
But with FPPS the fee is never the fee. That is the airport currency exchange sign that says "0% COMMISSION" and gives you something about 14% worse than market rate. Where is the money going?
I don't think most miners are actually making that mistake, at least not all of them.
It's time to explain the real reason here.
Compliance by proxy.
And this is what's key to understand.
History: Once upon a time a pool called GHash(.)io got above 40% of the hashrate (which Foundry is doing repeatedly at this point) and the miners all fled out of instinct to protect the network. You simply cannot have any single entity making 50% of the blocks that get added to the chain or anything approaching that.
So why aren't miners doing it today? Are they that addicted to variance reduction when the calibre of miner that uses Foundry is perfectly capable of reducing their own variance anyway even though it's costing them a fortune?
Again the entire space needs to understand why history will not be repeating itself here and this where I find the greatest amount of self-delusion and dishonesty in this space.
Compliance by proxy was not a thing in 2016. At least not for miners.
Since then, someone has come along and turned what is completely unacceptable to the powers that be - Bitcoin mining - and turned it into a completely sanitized, censorship prone shell of its former self - and *that* is the true motivation for "miners" paying these exorbitant fees.
Compliance is new. And it isn't a factor people are taking into consideration.
Whenever we point out how precarious the situation has become, there is the typical response - "If Foundry ever do <bad thing> then their miners will just leave".
It's time to put this cope-strategy to bed.
If a miner is perfectly capable of reducing their own variance to the tune of reliably finding multiple blocks per day themselves - why are they using a pool at all? Especially if that pool costs a fortune?
Or more crudely - If losing a tonne of money for no apparent reason isn't compelling enough to leave Foundry, then jeopardizing Bitcoin isn't going to be either.
The true motivation is all that matters, and its overwhelmingly just compliance. "Miners" of substantial size increasingly do not want anything to do with Bitcoin and want all their hashrate transformed from raw Bitcoins coming fresh out of the blockchain into a nice clean product that their accountants and lawyers can tolerate regardless of the cost.
To take the counter position to my argument here, there are of course costs to rough-housing it and grappling with Bitcoin directly as MARA does and I don't want to pretend otherwise but I don't think they come anything like close to justifying the enormity of the revenue lost due to the extreme over-kill that is FPPS.
This is the only area in which I will take pushback from someone in one of the relevant companies as it's possible I am just wrong.
The following companies - BitFarms, Hut8, RIOT, WULF, HIVE, Cleanspark and a couple of handfuls of others are all - to the best of my knowledge - paying a fortune for the combined benefit of variance reduction (which they absolutely have no need of) and compliance by proxy.
If anyone from any of those companies can explain to me why I am wrong and that if/when Foundry's size results in them engaging in censorship or any other abuse of the network (heck, already requiring KYC and regular inspections of mining facilities is unacceptable and that's already been the case for Foundry miners for years) then why should anyone believe you would move to another pool or go the Mara route?
At present I believe that Foundry could continue its inexorable ascent to the 51% magic number we're all afraid of and the new cope will be "Well they haven't done <bad thing> yet" and we'll just keep moving the goal posts about what constitutes a bad thing.
At the moment "It's just KYC", "It's just mandatory inspections" and "It's just lost revenue."
All of that is unacceptable. "It's just transactions associated with Russia/Iran" comes next and the shareholders of publicly traded Bitcoin miners are unlikely to view censorship based on that criteria as being anything to worry about. "Why do you hate America??"
The old cope of "another miner will just include them and their business will survive while the censoring miners die" is complete and utter delusion.
Almost 100% of revenue from the chain is subsidy. Transaction fees are neither here nor there. And if we think the US Pubcos are all going to voluntarily go admit bankruptcy because they lost a few hundred bucks a week from mining blocks that censored blacklisted UTXOs then we are deluding ourselves.
I reiterate - miners are with Foundry because compliance is increasingly all that matters. This has resulted in enormous centralization of template construction that becomes a genuine attack vector at ~30% and has been consistently way above that for a long time now. 51% is a meme, and imo not a powerful enough one to inspire change if it actually comes to that. The frogs are already boiling and no one cares.
Let's be honest. None of the miners on Foundry are leaving any time soon but the variance reducing product they offer that can be so trivially replicated elsewhere is not why any of them are doing what they are doing.
Foundry is the sole occupant within the regulatory moat that is Bitcoin mining in America and I don't see that as trivial to replicate at all.
And the reason I wish to sound the alarm 10,000 louder than I have been before this point is that the current US administration has run a campaign that specifically talks about centralizing Bitcoin in the US.
The phrase "We will make all the Bitcoins in America" is exactly the worst possible thing you could want to hear given everything I've talked about in this post and not only is it not being rejected by Bitcoiners, it is being celebrated as a good thing.
View quoted note →
