The Fall of Mining and Rise of BrightID

Bitcoin in Essence

You probably got to know Bitcoin by learning about miners, ASIC devices and creating new Bitcoins with noise, heat, and of course lots of electricity..

But, what exactly are these miners and devices doing?

To understand that, let’s have a clear idea of Bitcoin and the intentions in its complex design. Bitcoin’s whitepaper is the best place to start. It is titled as “Bitcoin: A Peer-to-Peer Electronic Cash System”.

So, Bitcoin is an alternative for conventional digital money to be transferred peer to peer with no middlemen involved; just like cash money. Digital money in banks’ has no privacy which is the most significant feature of cash. Banks can close accounts, limit transfers, etc.; the kind of problems you don’t have when you use cash.

Long story short, Bitcoin is a technical solution to create a digital form of cash to be used peer to peer without banks and their possible fraud.

In Majority We Trust

Banks keep account balances in their ledgers and update the balance after each transaction. Without them, who is going to keep balances? Without banks, who does the hassle that is traditionally done by them?

Bitcoin creates a network of ledgers instead of just one. Instead of a single ledger in a bank, there are many.

What if someone tries to change the balances in some ledgers? We don’t have that problem with banks and trusted their ledgers. Now that everybody is hosting ledgers in Bitcoin’s network, who do we trust in conflicts?

Bitcoin’s solution is trusting the majority. That revolutionizes trusting models. The truth used to be determined by a trusted third party and now, it is what the majority agrees on.

When the majority owns the truth, it is vital to make sure that each person gets to have one vote only. Bitcoin has its own method of preventing people from casting multiple votes by hosting multiple ledgers.

The Rise of Mining

One solution might be limiting each IP address to represent a node. But IP addresses are cheap and can be easily bought in large numbers.

Bitcoin whitepaper argues:

“If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs.”

CPU is much more expensive than IP and hence the miners of Bitcoin. In 2008 each person typically had no more than one PC with a single CPU. So, it was reasonable to identify nodes based on their CPU rather than IP. The whitepaper argues:

“Proof-of-work is essentially one-CPU-one-vote.”

So, the miners solving any valuable mathematical problem to be rewarded is a fallacy. Miners are there prevent users from creating multiple nodes in the network. Miners do not secure the network by solving complex problems and consuming electricity.

Miners are simply expensive identification devices to stop people from creating multiple nodes and exploiting the truth that is based on the majority.

Is that still the optimal solution we have today? Or is there a better way?

The Fall of Mining

Relying on processing power might not be the best approach anymore. Let’s make it clear:

This approach has failed to secure the majority against exploitation threats. There are currently 4 major mining pools that form the majority of Bitcoin’s network.

Besides that, Bitcoin’s network is currently consuming more electricity than the entire population of Switzerland. Do we really have to waste so much energy to prevent multiple accounts in a network?

The last but not least important problem is that unlike the original design, Bitcoin does not distribute its benefits fairly anymore. Back in the days, everyone contributed by sharing their CPU enjoyed equal benefits of the ongoing value creation.

But, today, people even buy expensive devices and cannot gain a significant share out of billion dollars of value that is created every year. Even their small revenues are mostly spent on electricity and buying the devices.

Long story short, billions of dollars of annually created value is being streamed to electricity providers and Bitmain which has the exclusive technology to produce ASIC devices.

The Rise of BrightID

BrightID is a unique human account provider that keeps fake nodes out of networks. It uses open-source algorithms to detect sybil attacks and rank its nodes based on the probability of their uniqueness.

Getting verified as a unique node in BrightID does not require any CPU or mining devices. All you need to do is set up a mobile app and make connections to other people like family and friends.

That is huge. For the first time, we can create an optimal, yet original, version of Bitcoin that does not rely on mining to make sure that nobody exploits the majority by creating multiple accounts. There is no need to waste all that electricity either.

My next article will focus on describing how such a system — with BrightID and without any mining — would look like. Stay tuned!

PS. I want to thank my friend and colleague Mahdi Heydari who helped me with his wisdom and knowledge.