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What is a Bitcoin Mining ?

It is the process of minting new bitcoins. Simplifying it in few steps:
  • You acquire a specialized mining device (ASIC - Application Specific Integrated Circuit). This device is built for one purpose only, to find a random number by running the hashing algorithm over and over again.
  • You choose if to mine Bitcoin as a single miner or to join a pool, this is key since your chances to win the Bitcoin "lottery" are higher the more "mining power" you have, adding your miner to a pool increases your chances to earn Bitcoin
    • You calculate your cost, hence your risk, depending on your mining hash rate, you may not cover your expenses.
    • If you decide to to go solo, you will start mining right away.
    • If you decide to mine in a pool, you next step is to choose which pool to use, There are many, all centralized entities, some more popular than others and this is why I write this article, in my opinion, this is a problem. The most popular centralized pool get the most hash rate and therefore they lure the most miners.

How much does cost a Bitcoin mining ASIC?

Depends on the hash rate and power consumption:
In the table above, the second column shows the hash rate, which is key, the more you get from the ASIC, the more rewards you may get.
You need to do your homework and decide if your cost/prize ratio works for you. Depending where you live, if the electricity cost is too high, you may not be able to run a profitable miner. In the section "Is it worth it?" I go deeper into it.

What is a Bitcoin Mining Pool?

A mining pool normally consist of a company that runs an extensive number of Bitcoin ASIC miners with a very high hash rate, they invite users to connect their ASIC miners to their pool, in that way, their overall hash rate increases and if a block is discovered by the pool, the rewards are distributed among all users based on the hash rate provided.
Many companies and wealthy individuals living in countries where the electricity is affordable, have chosen to invest in mining ASICs (many of them) and instead to compete alone, they join a pool, normally, they will join the pool they have decided will provide them with the highest possible cost/reward ratio, each country is different on taxes and electrical cost, so you do your business case.

Is Solo Mining it worth it?

In few words, if it wasn't, there would not be so many miners across the world, evidence of it is the hash rate continue to increase. Clearly they have done their business case. As with any business, many are not ran efficiently, thus, some will go bankrupt or lose money in bear markets, most will do well in bullish markets.
Electricity prices vary per country, you can use this web site to calculate your potential average earnings per month depending on the hash rate, electricity cost and the consumption in watts of the ASIC miner
As you can see, not a good business to solo mine in Germany, those individuals will have to acquire at least 5 to become roughly profitable, or, check if the use a mining pool will be profitable.
Clearly, the electricity cost is a key factor, not only the amount of hash rate you are able to acquire.
IMPORTANT If you decide to go ahead, while doing your business case, remember to include the price depreciation of your ASIC hardware over time....

Are Mining Pools a Threat?

In my opinion, yes.
NOTE If interested, bookmark the source: https://btc.com/stats/pool?pool_mode=day
As you can observe in the graph, Foundry and AntPool combined have more than 50% of the hash rate of the Bitcoin network, this, in my opinion and I am not alone, it is a problem that requires risk assessment and the community to find a solution.
The main problem with all this is obvious, the majority of the miners, which are individual investors, wants to maximize their profits, thus, they will look the path of less friction to achieve it, hence, the mining pools become appealing. This causes centralization of the security of the Bitcoin Network in a couple of companies and this is quite problematic.
NOTE Only one pool or individual miner manages to solve the problem and get the 6.25 Bitcoin+fees reward every 10 minutes

The Importance of a Miner

A Miner of Bitcoin, like a Node runner, is very important for the security of the network. One Node, one Vote. If you are running a Node at home, but not mining, you are validating transactions and running the latest core software in your Node, therefore, you are voting that the software you are running represents the real Bitcoin. If a bad character in the ecosystem decides to fork Bitcoin (make a copy and add changes) and the majority of the Nodes do not change their software to that network proposal, Bitcoin remains intact, but, we need the Miners, which are running Nodes as well but with the Mining function active, that requires the ASIC hardware activated.

The Threat

The concentration of hash power on one company means that the company may:
  • Decide to support a hostile fork to change Bitcoin into something more centralized and easy to manipulate (not all mine ASICs are from individuals, the companies have many of their own)
  • Censor transactions
  • Cave to regulations and enforce KYC to be part of the mining pool

The Solution

Decentralized Mining Pools, this will be the perfect solution, unfortunately it have not been easy to implement.
The first attempt was launched a while ago, P2POOL, the project had a couple of issues with scalability and therefore it slowly died, for what I manage to find from this pool, the last block it mined was on February 2019.
We do not have, to the best of my knowledge, any functional decentralized mining pool solution, we have a proposal by the name of Braidpool, from Bob McElrath and Kulpreet Singh using payment channels. This is still in development, if interested, I will suggest you subscribe to their blog.
  • What can we do in the mean time?
    • If you are deciding which pool to connect to or already connected to one of the main two pools, consider changing to a smaller one, yes, your yield may get reduced a bit, but you will be further securing the network.
    • If the electricity cost in your country is competitive, consider creating your own pool in your country, create a business case, gather investors and sell them the proposal.
    • Consider talking to your community leaders, gather signatures and propose to use the tax money from the state to create mining pools, which earnings are use to improve the community while creating jobs, allocated in the maintenance and running of the mining pool hardware and software.
    • Run the numbers and seriously consider running a miner, you will be securing the network and staking sats!
Is Solo Mining it worth it? In few words, if it wasn't, there would not be so many miners across the world, evidence of it is the hash rate continue to increase
The hashrate isn't an indicator of solo mining, just mining in general. Pools increase the hashrate as well.
Have you looked into stratumv2? There's an improvement spec'd out that would help combat centralization with job negotiation. There's still room for improvement but I don't think mining pools are going anywhere
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No argue there, that is not what I tried to convey. I simply explain that the hash rate continues to increase over time and therefore, you can assume that mining adoption keeps increasing and therefore it is profitable in many countries. To the best of my knowledge, there is no way to know how many solo miners are out there exactly, even the number of nodes reported does not include the ones running over TOR, which are many, specially since Umbrel OS and Start9 appeared in the picture
Thanks for the tip about Stratumv2!, definitely worth looking into, checking the web site and reading that Matt Corallo is one of the collaborators speaks tons to me.
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