Miners Control Bitcoin
…and that’s a good thing
This is the first of four articles initially intended to outline BitPay’s current thoughts and plans regarding the block size issue, but which grew too long for one article.
A few weeks ago, I had a conversation with someone who expressed a notion that some control should be taken out of the hands of miners. I found that interesting. It begs the question, if you take some power out of the hands of miners, who are you giving that power to? Should one person own the Bitcoin trademark? Should they have the power to set the official Bitcoin™ consensus rules? Perhaps miners should sign their blocks such that only those that have been certified to follow the official, trademark protected, Bitcoin™ consensus rules are allowed to create blocks. If you follow this line of thought to its logical conclusion, you end up with a centrally managed system with no need at all for mining.
Individually, miners control very little, but collectively, they control everything about bitcoin. This is an important and fundamental property of Bitcoin. A miner decides whether a given transaction is valid and eligible for inclusion in a block. Miners also decide whether a given block is valid and should be incorporated into the chain they are building. But one miner alone, operating on a different set of rules, would produce blocks that are rejected by other miners. They wouldn’t earn any reward for their efforts. So, while miners are competing with one another to produce blocks most efficiently, miners also have a need to cooperate. They must reach a consensus regarding the rules that define what is or isn’t a valid transaction or block. They also need a degree of certainty that the blocks they produce will be accepted and incorporated into the chain by the majority of miners. So, the consensus rules need to be well defined and easily understood.
But miners can’t force people to use Bitcoin. Miners don’t just compete with each other; collectively, they compete with many other systems. A user can choose from a variety of legacy, centralized networks like Visa, MasterCard, and PayPal, to name a few. There are also many cryptocurrency alternatives from which to choose (there are more than 600 altcoins listed on coinmarketcap.com). Miners must provide a good service at a competitive price point if they want to gain market share and retain customers.
Miners can delegate their power. They may choose to let a mining pool produce the blocks they mine, thus letting the pool enforce the consensus rules or censor transactions if they desire. Miners can also let others influence or control what software they run and the rules that software enforces. The only reason developers, mining pools or any other non-mining constituents have any say in the matter regarding consensus rules is that miners have chosen (consciously or negligently) to delegate their power. Miners can put their businesses at risk if enough of them aren’t paying close attention to the decisions being made on their behalf. Miners need to be knowledgeable and engaged when it comes to matters affecting the operation of the Bitcoin network.
With proof of work based consensus, Bitcoin places all power over the operation of the network in the hands of miners, and anyone can become a miner. This collective, coordinated action is what makes Bitcoin a powerful, novel and revolutionary system. To undermine the power that miners have over Bitcoin is to undermine everything that is Bitcoin. If the thought of miners having this much power is scary to you, then become a miner. If centralization of mining worries you, the solution is not centralization of a different sort. Become a miner. To repurpose a famous Alan Kay quote, anyone who is very serious about Bitcoin should be a miner.
Continue Reading: Bitcoin as a Settlement System.