West vs. East – The Consensus Balance of Bitcoin Hashing Power

Mining in China. There are five constituencies of consensus and none have complete control over the system, all of them have to agree: developers, miners, exchanges, wallets/ users, and merchant services. Changes won't happen if the economic activity doesn't follow. Neither the majority Western users and developers nor the majority China miners can take over; it creates a balance of power. The centralization of mining isn't healthy but it's the result of the massive increase in mining performance over 5 years, from CPU to ASIC, from 40 nanometer down to 5 nanometer. Because of Moore's Law, we're going to see a re-decentralization of mining.

I would love to hear your thoughts on remark which I hear from people when I talk to them about Bitcoin, who say, “Well, a large majority of your decentralized system is now mined almost completely centrally in China by very few organizations.” What is your response to that?

My response is, in order to understand Bitcoin’s consensus mechanism, you need to understand that there are five constituencies of consensus. None of them has complete control over the system, all of them must agree.

You have the developers, miners, exchanges, wallets, and merchant services.

If you as a miner decide to take the chain in a particular direction, and the economic activity doesn’t follow you… If merchants, exchanges, wallets, users and developers stay on the other side, you are mining a chain without economic value.

The mined coins that you cannot exchange, sell, or use to buy any products and services. There is a balance there.

In fact, one of these significant points of balance is that the vast majority of development, startups, and users are in the western world, even while vast majority of mining is in China.

That is a beautiful balance. That means Chinese miners can’t take it over, and that also means that neither western developers can take over. It creates a balance of power. I think that is a good system.

I don’t think it is healthy to have all of the mining centralized, and I think that there is a lot of centralization in mining, but that is an artifact of the very rapid performance increases over the last years… from CPU to GPU to FPGA to ASIC, from 40nm down to 5 nanometers.

Now we have hit a wall, Moore’s wall, with a doubling performance increase every two years.

That changes the system dramatically for everybody. New hardware development slows down, and we will see re-decentralization of mining.

About the author

Satoshi Nakamoto

We developed bitcoin. This post is derivated from aantoop yt video with same headline under cc by license.

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