Kurt Wuckert jr. in front of a mining farm

Mine about it

Sometimes, everyone needs to join the fight to achieve victory. This isn’t hyperbolic. It’s reality, but so many people think that internet bickering and “proof of social media” is the best way to fight for Satoshi’s Vision of Bitcoin. It’s not.

Bitcoin needs more business development, better connectivity, more robust tooling, simpler documentation, more hash power, and less whining.

In the meantime, Bitcoin is full of people who like to whine. As a subset of internet culture, this should probably have been expected, but this sort of instant-feedback, backseat-driver culture is exactly what led to the UASF “revolution” of leadership by the laziest endpoints on Bitcoin pretending they’re in charge in 2017. They’re not, and this era in Bitcoin will be looked back upon as one of the most wasteful, slothful times of missed opportunity in history. Trillions of dollars absorbed; almost nothing to show for it.

Big block Bitcoin is a response to this culture of laziness and entitlement, but we still have a problem of sloth and gluttony in the big blocker space too. But it’s bonkers. We won the protocol war, but we have not won the cultural or the economic war, and we need to rally together to solve these problems as a team. One really good way to start is if you’re running the SVnode Bitcoind client as part of your business operations, you should stop. Instead, make a relationship with a commercial node on the network, and reallocate the cost of your existing node toward ASIC mining with the pool of your choice instead.

Backstory

Mining itself is profitable, but not necessarily on paper in an easy reconcilable fashion. It took me two cycles to fully realize this. Mining during bull markets should be nearly 100% about selling for fiat, and mining during bear markets should be about buying hardware assets and stacking coins. On a USD-based business plan, this makes little sense, but it does based on market cycle projections.

There’s a few other things that aren’t immediately obvious in mining.

1: The subsidy is there to help us build, and that’s ok – for now.

2: Transaction fees must outstrip subsidies in our lifetimes, but nobody knows exactly when.

3: Hardware needs to be bought when everyone’s selling and sold when everyone’s buying.

4: Dollar-based economics is the wrong metric to focus on. Mining bitcoin at a loss during a bear market makes for great things to sell during the bull market, and it’s wise to sell coins AND physical assets.

So why don’t we do that?

Satoshi did not want a permanent block size limit, and he did not figure for multiple chains out of consensus. He assumed economic demand would fix everything—and I agree—but these variables were introduced out of the scope of the original intent of Bitcoin, so at the very least, the chessboard is now 4D (BSV, BTC, BCH, XEC) until a coming consensus.

In order for fees to outstrip the subsidy, business usage needs to create exponentially more demand for coins to be processed on the ledger. If insufficient demand exists in the market, prices for fees need to fall until demand comes into equilibrium. This is basic market economics, and please let’s ignore the fact that in 2017, Bitcoin went through a civil war where consumers organized to raise their own transaction fees for fear that corporate cartelization would lower them.

But there is another balance problem here too. Lowering the cost of fees has a short-term impact on the profitability of miners until block sizes grow exponentially, but the network and node implementations aren’t ready for such growth. So equilibrium needs to be discovered inside of these factors in the network’s economics.

So what’s the problem?

Well, in Bitcoin SV (BSV), there is a budding startup culture, which is great, but we need to rally together on this one.

Brands like Certihash, Twetch, VX Technology, TonicPow, Haste Arcade, My2Cents, and others are building the foundations of what could be multi-billion-dollar industries fueled by bitcoin micropayments, but they all exist in a parenthetical period of Bitcoin confusion and in a place where the incentives of the network have led to empty blocks being more profitable to mine than full blocks—which has some precedent from another era when the biggest miner had lackluster connectivity.

That can be ok when profitability among all 4 Bitcoin chains is near equal because there’s still 3-5 honest pools on BSV to secure and process transactions, but when BSV sprints out ahead in profitability, suddenly empty blockers arrive because they have raw hash power, but incredibly weak computers running the client software, and the only way to pay their electricity bills is to mine empty blocks.

This isn’t normally a problem, but when empty blocks get to a certain percentage of total blocks per hour, they start to function as a de facto DDoS attack against any node who doesn’t have their mempool size and “zero-conf” focused settings very high.

This requires an assessment and a solution!

TAAL (CSE: TAAL | FWB:9SQ1 | OTC: TAALF) and QDLink provide most of the hash rate on BSV. Mining Dutch and Pro Hashing join occasionally, and GorillaPool (Disclosure: a company at which I am a partner) provides 3-5% of network hash rate while being the exclusive “BSV only” pool and the only public pool accepting independent hash.

The above operations offer a mix of services and generally compete for blocks with each other and secure the network. This is, in my opinion, a sufficient amount of distribution for the network, but it could benefit from more minds and competition generally.

Then, there’s the predatory empty block miners that come in with lots of hash, and we need to come up with a solution to mitigate the issues they cause.

Here are some thoughts: 

1: Raise network-wide minimum fees.

  • I hate this idea for a few reasons, but the first is that raising fees discourages the micro-commerce that we need to encourage to come to BSV right now. It also doesn’t really change the game very much. If you’re not profitable with a dollar of fees per block, $10 isn’t going to change much either, so the amount that fees would need to be raised would be detrimental to the use-case anyways, and the real problem needs to come from (much) bigger blocks.

2: Encourage block size to grow.

  • This is great long-term but has some short-term limitations. Network latency isn’t great, LiteClient isn’t mature enough for use by exchanges and block explorers, and the software itself is only capable of maybe 200-250% growth in total block size before the network hits all kinds of practical ceilings, even under ideal circumstances. So, for the near term, we can’t even grow our way out of the problem until next-generation node implementations and network conditions improve.

3: Pump the price.

  • Tether, Inc doesn’t like BSV. Neither does Bitfinex, Binance, FTX, or the rest of the ‘crypto’ lizards, so this isn’t happening until whales see the opportunity and retail rolls in. So this is a slow burn that looks a lot like those startups getting funding, clients, and big revenue.

4: Rethink network management.

  • There is an opportunity for node operators to rethink how we agree on what sort of behavior is valid. I think honest nodes have every right to invalidate any block that causes chaos on the network, but it’s important for them to be able to coordinate on policy settings for the network. This will require some thoughtful proposals and some negotiation and coordination among nodes, but might include things like the reintroduction of the alert key, agreement to utilize MinerID, sliding scales and policies on minimum fees, mempool sync, minimum valid block size over N number of blocks relative to X number of standard deviations from the average block size relative to the mempool, and so on! 

5: Sue empty block miners.

  • This seems simple if you have never been part of commercial litigation before. The law is a slow grind, and the odds that problems get solved in under a year approaches zero very quickly.

6: Mine about it.

  • This is the fastest, surest solution to stability of a strong BSV network, and it’s something every company in BSV needs to consider. We saw the impact of TAAL adding 50 petahash to the network over the last week, and that data matters. Usability smoothed out, zombie miners dissipated, and things got better for everyone, but we can’t all just rely on TAAL to fix everything.
  • The subsidy is still quite high at 6.25 coins per block, and that creates an opportunity for everyone! Startups in the space who need the network and ledger to be secure as a predicate to their successful businesses need to allocate some funding to hash power. (I’m looking at you, managers, and portfolio members of Ayre Ventures, Satoshi Block Dojo, Unbounded Capital, Two Hop Ventures, Pi Zero One and others!) 
  • For $3,000, you can add about 100-110 terahashes per second to BSV. Spread across even 100 companies, and we have collectively generated 10 extra petahash of security, and at today’s network rate, 3-5 extra blocks per day that can be full of your own company’s transactions while also cash flowing in freshly mined BSV back onto your company’s holdings for the long term.
  • If everyone in the space put $10,000 toward mining, we could have stopped the empty block miner from EVER causing one moment of chaos on the network.
  • This is not a call for altruism. Mining is a cash-flowing opportunity, ASICS are depreciable assets, and when the bulls return at the top of the next cycle, your ASICS can likely be sold for more than their purchase price.
  • This also helps your pool of choice offer you mAPI and various other services more reliably in a mutually beneficial economy.

I can’t express just how powerful crowd-sourcing BSV’s victory will be for everyone’s story. Bitcoin subsidies give us some leeway to be lazy, but they also cut in half every four years as a stern reminder that we need to get out of this with growth! Maybe your company should put some budget aside for the good of the network that it runs on, and we can all experience the benefits of my favorite meme.

Watch: The BSV Global Blockchain Convention panel, Blockchain mining & energy innovation

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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