Bitcoin is currently the largest and most secure open source network. The idea behind BTC is ingenious and involves over 50 years of research. Satoshi Nakamoto was the first to create a working peer-to-peer payment and money system with Bitcoin. In the past, the problem was that you didn’t know exactly how to prevent double donations without a central instance. So that someone spends the same amount twice. Satoshi managed to solve this problem with Mining. Meanwhile, a separate branch of industry has developed around Bitcoin Mining, which also brings problems with it.
Companies and private individuals (less often) compete for the next block in the BTC network in order to collect the suspended reward. Many miners have joined together to form pools in order to bundle the hashrate and achieve a higher probability of finding a block. It is precisely this circumstance that repeatedly leads to Bitcoin being accused of centralized mining and security being called into question. This should now change with a new protocol and lead to more decentralisation in BTC mining. A sensation in which the miners themselves will decide at the end whether it makes sense or not. Let’s take a look at Stratum V2 and the chance for greater decentralization in Bitcoin Mining.
Stratum V2 in the fight against BTC Mining Pool Centralization
One of the largest Bitcoin Mining Pool operators in Brain has published a code specification called Stratum V2. The specification aims to significantly change the way Bitcoin Mining works. The aim is to increase the safety and efficiency of mining pools, which unite many miners around the world.
However, the advantage is not necessarily to be found in the Bitcoin mining pools themselves, but in the individual miners. This could eliminate the centralization of the mining pools forever.
Bitcoin developer Jimmy Song commented on the new protocol:
“If this protocol delivers what it promises, mining centralization as an argument will be obsolete.”
Meanwhile, Bitcoin developer Matt Corallo, one of the developers of the protocol, wrote in a recent Reddit AMA, “This is huge for centralizing mining. Instead of focusing on pool centralization (the world we are in today), we can focus on centralizing the actual miner [and] mining farms!
Last year Corallo announced the BetterHash protocol, which has a similar goal to Stratum V2. Now Corallo and Braiins want to pool their efforts to work together on the protocol that will address a number of current issues at Bitcoin Mining Pools.
Bitcoin Mining Pool centralization soon over?
Bitcoin Mining is no longer as easy as one might think. In the early days it was even possible to mine lucratively from home with your own computer. In the meantime, the overall performance (Hashrate) has reached dimensions where only professional mining farms can really mine Bitcoin profitably. Due to the high competition, mining pools have formed to unite the small and large miners in order to achieve a higher hashrate together and to increase the probability of finding a block. If a block is found from the Mining Pool, the reward is divided among the entire Mining Pool.
The respective hashrate fed in is weighted and the reward is distributed to each one according to weighting. This offers an advantage for all miners in the pool as they can increase their probability. Otherwise, the small miners would probably never find a block and thus get stuck on the costs of mining in the long run. You can imagine this similar to a lottery community.
In the meantime, some large pools have crystallized, which are quite worrying for some. Currently, 3-4 mining pools have over 51% of the total hashrate. Those who hold over 51% of the hashrate over the long term could control the network and theoretically manipulate, exclude or double spend transactions. Although the individual mining pools are not directly related, it is often the point of criticism that calls Bitcoin’s decentralization into question.
But there is also another problem. If one of the miners finds a block in a mining pool and receives the current reward of 12.5 Bitcoin, the mining pool decides which transactions go into that block. Bitcoin experts fear that these centralized entities could use this power to censor transactions they don’t like.