Bitcoin might be naturally resistant to mining monopolies – or so claims a new research paper authored by University of Siena professor of economics, Nicola Dimitri.
At a high level, the paper contends “the intrinsic structure of the mining activity seems to prevent the formation of a monopoly,” a finding that could ease some of the concerns in an industry currently grappling with whether miners have too much power.
Published in Ledger, a journal that covers blockchain research exclusively, the paper explains in depth how, in an equilibrium, miners don’t necessarily leave the system just because other miners are able to profit more by cutting their costs somehow.
According to Peter Rizun, co-founder and co-managing editor of Ledger, the conclusion is quite “important” for the cryptocurrency community.
In an email, Rizun, who is also the chief scientist for the alternative bitcoin implementation, Bitcoin Unlimited, told CoinDesk:
“The mindset of much of the community today is that ‘it’s critical that all miners have essentially the same profitability hash-per-hash, otherwise the most profitable miner will continue to grow until he controls nearly all the hash power.'”
The possibility of mining power centralizing has been particularly worrisome to developers.
For one, at least one mining pool is alleged to have used a more efficient way of mining – known as ASICBoost– to increase profits, which some think could force other miners to leave, said Rizun. And two, many believe slower block propagation benefits larger miners, again pushing out smaller firms, he continued.
But, he contends the paper adds more game-theoretical color as to what incentivizes miners and establishes that these things don’t necessarily negatively affect users.
How much control?
It’s not only developers that are concerned, though.
The cryptocurrency community at large often worries about how much control miners have, or could theoretically have in certain conditions, displaying a kind of distrust that’s built up between groups, and that was especially apparent in recent bitcoin scaling debates.
Some users worry miners have too much influence over technical decision-making, for example.
And that was highlighted by one of Rizun’s Medium posts in March, which many readers interpreted as arguing that miners could force users to move from bitcoin to Bitcoin Unlimited.
As to be expected the post sparked controversy, getting comments like bitcoin contributor Meni Rosenfield’s: “This is a disgrace and stands against everything bitcoin represents.”
Too early to tell
Being a particularly controversial character, it’s possible developers will find fault with Rizun’s interpretation of the study. Even its author, Dimitri notes it might be too early to make broad assumptions.
“In its simplicity the model is omitting a number of elements, which could be investigated in future research,” he states in the paper.
And Dimitri goes on to admit that other variables, particularly those that have been contentious in bitcoin’s debates to date, could change the calculations.
He concludes the paper:
“Among them the current debate and interest on the block size, which may affect the main conclusions of the paper, at least in so far as the number of potentially active miners is concerned.”