For many, the level of centralization found in the Bitcoin mining ecosystem is the biggest issue for the peer-to-peer digital cash system today. As a technology that relies on decentralization in order to provide a censorship-resistant bearer ecash, any trend towards centralization should be viewed as problematic. In 2014, economist Kevin Dowd claimed the incentives of pooled mining are “totally destructive of the Bitcoin system.” The amount of mining that takes place in China led former Bitcoin developer Mike Hearn to state , “Bitcoin is controlled by the Chinese Government.” Those who believe bitcoin mining is far too centralized mainly point to factors such as ASIC hardware , where mining takes place, and various mining strategies as the main drivers behind this perceived centralization. In a recent presentation , Bloq Economist Paul Sztorc explained how the problems associated with bitcoin mining centralization may be overstated. “Mining is, in my view, the single new puzzle piece that makes it all work, but Bitcoin is protected by a lot of awesome things that were created way before mining,” said Sztorc. Efficient Miners Secure the Network One of the key points made by Sztorc during his presentation is that miners will always look to mine bitcoin in the most efficient manner possible. The reason much of the mining happens in China is the same reason that miners choose to use hardware specifically designed to find the next block reward . “They’re [both] just the same complaint about efficiency,” said Sztorc. “All miners must efficiency-maximize or they get fired by the protocol. And efficiency improvements are good because they support the network with a higher hashrate.” According to Sztorc, the fact that mining takes place in China actually makes it harder for Bitcoin to be attacked. “If we didn’t have miners in China, […]
