In a recent Q&A video, famed bitcoin commentator Andreas Antonopoulos answered a question about whether or not the bitcoin community should consider changing the current proof-of-work algorithm in an attempt to combat centralization and market dominance by Bitmain and its mining pools. According to Antonopoulos, doing so would be tantamount to “shooting bitcoin in the foot”. Join us as we take a look at the arguments Antonopoulos presents for maintaining the current mining status quo, and why he believes centralization is already on the decline.
Mining Centralization a Major Concern
Mining centralization is when a large majority of the hash rate dedicated to a cryptocurrency all comes from or centralized in just a few specific locations. For example, this could mean industrial scale mining operations (like the one Bitmain owns, which we wrote about here) or in mining pools where many thousands of individual miners will put their resources together in an attempt to gain an advantage.
While mining can be a good way to secure a network, centralization of that mining can become a serious concern
According to the question posed to Antonopoulos, Bitmain’s mining pools currently represent more than 50% of the entire bitcoin mining hash rate.
Centralization is a concern because it poses a number of risks to the network. Specifically, it increases the chances of a 51% attack, and it also could allow for companies like Bitmain to exert unnatural degrees of control over the network.
What Would Such a Change Look Like?
Some commentators and experts have suggested that bitcoin needs to perform a hard fork in order to change its proof-of-work mining algorithm. Typically, this suggestion implies that the community should change the mining algorithm so that Bitmain and its devices (which represent an overwhelming majority of the network hash rate) would be made obsolete.
Some commentators have even suggested that bitcoin should change to a completely different style of consensus such as proof-of-stake. These types of systems do not involve any proof-of-work mining and could prevent an ASIC manufacturer from gaining control of the network.
Obviously, these types of suggestions and proposals are always met with major flurries of disagreement on both sides of the fence.
Antonopoulos says no to PoW change
In response to the question, Antonopoulos said: “I think a proof-of-work mining change does not combat centralization, in fact it’s likely to make it worse.”
But how would it make it worse? First, he suggested that changes to bitcoin PoW would “devastate the security of the bitcoin network”, and that “all of the existing security investments in bitcoin would be wiped out, we’re talking several billion dollars of industrial scale infrastructure that secures bitcoin against various forms of attack, and so that’s not a good thing”.
In his opinion, mining centralization is currently experiencing a reversal, and things are once again slowly becoming decentralized. Antonopoulos said: “The centralization of mining is already reversing itself. It’s going to take several years until that plays out but we’re beginning to see the emergence of other manufacturers making ASICs and other locations vying and competing for this.”
Antonopoulos: Centralization is “already waning”
On the subject of China, Antonopoulos said: “The concentration of mining in China is a disadvantage for Chinese miners to because having too much mining in one place makes you susceptible to political coercion and extortion.”
If such a fork or change in bitcoin were to be attempted, he suggested that “an attempt to change bitcoin’s proof-of-work would be a contentious fork that would not have majority consensus” and would instead result in a new, forked currency like Bitcoin Gold or Bitcoin Cash.
In the end, Antonopoulos claimed that making changes to bitcoin’s PoW mechanism would be “shooting bitcoin in the foot in order to really deal with the threat of centralization that is already waning”.
Does Bitcoin Need a Change?
Most cryptocurrency enthusiasts and experts agree that centralization poses a threat. However, what they can’t agree on is first whether or not the threat is significant enough to require action, and secondly, if action were required, what should that action be.
In the case of Andreas Antonopoulos, while he is a highly respected and well educated commentator and expert, having wrote several popular books on the subject of bitcoin, he is not the end-all representative of the bitcoin network. Therefore, many will undoubtedly disagree with his assertions that the current proof-of-work mining system should not be changed.