The great mining swindle

One part of the hijacking of Bitcoin stems from the manufacturing of ASIC chips. The purpose of a node is not simply to find a puzzle that gives you the block subsidy. I will say subsidy again here as it is a diminishing incentive and not a reward. The Bitcoin white paper defines the process conducted by nodes in section 5. Nodes do not merely solve a simple hash puzzle — a process that ASIC devices help with — but they order transactions in chronological sequence, verify the integrity of transactions, and ensure the propagation of blocks and transactions.

In fact, the very first step for running the network and being a node is about network propagation. In the white paper, the first step is explained to be: “1) New transactions are broadcast to all nodes.”

It is very simple; consensus is provided to the entire network incredibly efficiently in an ultra fast manner due to the formation of a giant component in the network that develops as a result of an ultra connected small-world system. As such, the primary element and aspect required to run a node are network conductivity and propagation.

The second step involves the chronological ordering of transactions that are collected into a block. To collect a transaction, the node first needs to verify and validate the time-ordered sequence of inputs and ensure that the transaction meets all of the rules. To do so, it needs to be both a computational system and a storage system.

Only then steps three and four are progressed by the node for seeking the solution to the block puzzle. But equally important, one must also note that step four involves propagation subsequent to the solution of the puzzle. When a node has found the solution, it is paid through the propagation of a block to all nodes. Such are not all users, but all other miners who act as nodes.

Next, nodes self-validate and verify. To be a node, you build on other parties’ blocks when and if they are valid. As we see in step five, a node validates the block ensuring that no double spends have occurred and that all of the transactions the other node included are valid and within the rules.

The white paper defines a node.

There is no threat of mystic pseudoscientific FUD spreading such as “selfish mining,” as all nodes send as near as possible to all other nodes. In a small-world network, there is no place for a non-mining Sybil node. You cannot jump between nodes and intersect and inject blocks quicker than other nodes as you are always reacting as a selfish miner.

The process in Bitcoin is simple:

1. A node discovers a block, and propagates it to the network.

2. Close to all nodes automatically have the block.

3. The selfish miner with valid nodes checks and verifies the other node’s found block.

4. The selfish miner now reacts sending an alternative block subsequent to the other node’s block.

5. The selfish miner is acting following a time delay, and is not instantaneous. The selfish miner who seeks to instantly send a previously discovered block after the fact and on the receipt that another node made a discovery always loses, and must instantly send to the network multiple blocks. The result is that the selfish miner is easy to subvert. An honest miner suspecting a selfish miner can simply send a fake block header from any network address where the node of the selfish miner will then need to respond before checking. The result is an incredibly simple to detect so-called attack.

6. More importantly, the node of the selfish miner has a guaranteed win that becomes probabilistic in nature.

What people fail to understand in all of such myths is that it is not the discovery of a block but rather the propagation of the block to all mining nodes (which is redundant as the only nodes within Bitcoin are miners) that is important here.

It, of course, brings us to the swindle. A few parties such as Bitmain have misled the community into believing that miners are paid rather than subsidized with the “block reward.” Nodes are paid to include transactions, and it is done using fees. The block subsidy is a degrading temporary measure designed to incentivize the early investment into developing nodes. It helps subsidize the cost that would incur in building a large-scale storage system. But such is not what companies such as Bitmain specialize in creating. Such companies create ASIC chips. They are a small component and not even the major component of a node.

Between 2011 and 2015, I worked amongst other things on the development of large-scale storage and data distribution. The company (Cloudcroft) in Australia that I had working on solutions managed to create a large-scale compute and storage platform. In 2015, we managed to get the storage capacity of 6.2 PB for each single rack. Extending the same luster-based file system and moving towards ExaDrive DC100 SSD drives would allow a node to run energy-efficient SSDs, drawing as little as 0.1 watts per TB and in the current configuration storing up to 77 PB in each rack.

For an average 1TB block, we would have 144 blocks a day, 365 days a year (where a maximum block would be expected to be in the order of 50 TB). In other words, 52.5 PB of storage or a single rack. Nodes would optimise it, and have systems globally distributed in order to maximise propagation, but, the current system would merely require 6 racks per node to replace all of global commerce and accounting.

I will say it again: each node could replace the entire global accounting and financial system with immutable records — now.

The current market players such as Bitmain understand perfectly well that the subsidy will go down and that the value in the next six years needs to come from transactional volume. They do not seek long-term solutions. At present, they are seeking to extract as much value out of the network as possible without reinvesting. They do so by trying to convince fools that the only part of the network that mattered was solving the hash puzzle and that the transaction fees were irrelevant. They do so in getting fools to run inefficient hardware that would not meet the standards of any data center rather than moving towards scaled efficiency.

The lie, the misleading of the industry, has been the sale of small home “nodes” that do nothing. They simply allow companies such as Bitmain to sell ASIC-based pet rocks and a few to gain a level of collectivist control over an idle mass of uninformed people (see BTC, ETH).

It is time that people start to see what a node is and how it works and to stop the lies that have formed the foundation of the industry.

Bitcoin is an immutable evidence system, a ledger that stops fraud.

Bitcoin is the ultimate truth machine.