Bitcoin advocate and writer Andreas Antonopoulos addressed a gathering of listeners on June 2, 2018, to answer questions on the cryptocurrency industry. He has most notably authored several books explaining blockchain technology and cryptocurrency as well as offering his expertise on the podcast Let’s Talk Bitcoin.
Centralization in Mining
For the uninitiated, many digital currencies are based on the Proof of Work (PoW) consensus algorithm. This protocol states that miners validate new transactions and are rewarded in the native cryptocurrency. When Bitcoin was launched in 2009, it was possible to mine the cryptocurrency using desktop computers. However, as more and more miners joined the network, it resulted in an increase in the available hash rate in the network.
GPUs then became the preferred choice of miners and, eventually, ASICs soon gained prominence as the number one choice. The advent of cryptocurrencies has also meant that commercial mining has increased. More to this point, if a single miner or a group of miners earn control over the majority of computing resources in a network then this can result in a 51 percent attack.
While bitcoin is widely publicized as a decentralized currency, single miners or mining entities are having an increasingly larger share of computing resources. Antonopoulos, however, said that there has to be a limit to which we can make smaller and faster chips. We are already at the advanced stage of Moore’s Law and there is no possibility for a ten or hundred times increase in the efficiency of chip.
Critics proposed that a remodeling of the PoW consensus algorithm would again decentralize the network and all miners would have a common playing field. Antonopoulos criticized this idea and clarified that large commercial miners would suffer little harm with this policy.
The life cycle of an ASIC computing chip is anywhere between three to six months and these hardware companies have deep pockets. They would again spend a large amount of money to purchase newer and more efficient mining equipment. This would inevitably bring us back to the original problem and only small miners would be the probable casualty.
According to Antonopoulos, we have probably reached the limit of both Moore’s Law and centralization in mining. From here on, he believes that we are reaching the end of the centralization era in mining and Bitcoin will stay true to its theme of a decentralized cryptocurrency.
You Cannot Take Bitcoin out of Your Country
Antonopoulos criticized how government and regulatory bodies around the globe have treated bitcoin and cryptocurrency. He quipped, “You can take your country out of Bitcoin but you can’t get Bitcoin out of your country.” Tax authorities, for instance, have imposed strict capital gains laws on cryptocurrencies. Andreas made a light-hearted jab by saying:
“This step will make accountants richer than the IRS itself. You know there is a problem when you need to do a 300 page filing for a $35 capital gain.”
While bitcoin and cryptocurrencies have been claimed to be used for money laundering, Antonopoulos pointed out that the problem lies with the people and not the system. Traditional banking, for instance, has been used for stashing cash and escaping taxes for years.
He also spoke about how bitcoin was changing the world highlighting its growing influence as a currency. According to Antonopoulos, Bitcoin will revolutionize the banking industry and has a bright future with layer two scaling solutions also on the horizon. These solutions will enable Bitcoin’s Blockchain to handle a much higher number of transactions and truly scale.