Take a deep breath. Stop hyperventilating. Bitcoin has died a violent, crashy, gory death dozens of times at this point.
It's in Bitcoin community's, and GHash's, economic interest that no miner exceeds 50%. That's all you need to know to know that this is just another exasperated hand-wringer proclaiming the premature death of BitCoin.
Yeah, but this time it's different, and many early Bitcoiners are alarmed. A long-held, fundamental social contract has been broken.
We've long known this is a weakness of the system, but most early adopters assumed that our strong decentralized culture would prevail.
Clearly, we were wrong. So we either have to find a technological solution ASAP, or we may as well just let GHash operate servers -- it'd be much cheaper for them and easier on the environment, and the end result is the same.
>It's in Bitcoin community's, and GHash's, economic interest that no miner exceeds 50%.
Are Bitcoin community's interests and individual miners' interests aligned? I understand why the bitcoin community wouldn't want a mining pool with more than 50% of the share, but why should "selfish" individual miners care?
Miners occupy a powerful and yet somewhat isolated portion of rapidly evolving bitcoin ecosystem.
For many people in the Bitcoin ecosystem, making the technology successful is about more than personal enrichment. A lot of folks see Bitcoin specifically (because of its present success) holding the potential for big changes in a shorter period of time.
The people I've spoken with don't mince words: in general serious miners compete against others to make money, not societal change.
If the blockchain is dominated by a single interest, and that player starts abusing their market position, BitCoin's exchange rate will plummet and the economic interest in question will lose millions. So yes, it is in the community's interest and individual miners' interest to keep the hashrate distributed enough to prevent that from happening.
What happens when people lose faith in the system? The 2008 financial crisis, the great depression, etc....
This reasoning is based on the assumption that a 51% player must also be long on Bitcoin, and that they interpret the nature and value of the Bitcoin market in a similar manner to most members of the Bitcoin community.
In other words, assuming that they don't know anything you don't. Considering we're talking about an entity that's managed to become a 51%er, that assumption sounds downright Pollyannaish to me. The same line of reasoning also supposedly implies that nobody should want to get even close to this point. Counterfactually, as it turns out.
That said, I can see the attraction of that line of reasoning, too. When you've got a tiger by the tail, it probably is best not to contemplate too carefully what's at the other end.
Well, they aren't long bitcoin from buying mining rigs, they are long bitcoin call options denominated in energy. If the return seems likely to be too low, as eventually it must be when (if things continue) people make more efficient rigs, then it would eventually be in their interest to let the longer term options expire. It is totally conceivable that taking a huge short position and scaring everyone off of btc could mean more profit than the could be mined out of those rigs. Of course, you would need someone to take the other side of that bet, in a setting with sufficiently little counterparty risk that you can collect (which typically means a more regulated setting) and a sufficiently lax regulatory environment that you aren't likely to be accused of some illegal type of market manipulation. That said, people do seem to overlook such details... and this all only seems unlikely to very unlikely, not impossibly or absudly unlikely.
In other words, the stars would have to align in order for this to occur.
I don't really know what GHash knows, but I can tell you that GHash's hashrate has dipped well below 50% only a day later, as it did when this happened before.
The stars would have to align for it to be genuinely a good idea. Which... well... stars align, sometimes. Moreover, people make mistakes and think stars have aligned.
The threat here is that a single group has the capability to produce 51% of the hashes, possibly reliably (we can't know whether scaling back was deliberate or happenstance). It doesn't matter whether they are persistently using that capability.
Perhaps the deeper threat here is the rate at which the goalpost is moving.
It's strange, this situation where in there are all these things that would be seriously problematic were they to happen, unless of course they actually happen, in which case they're not actually a problem at all.
Large contributors to the GHash pool pulled large amounts of resources out of the pool. GHash isn't a monolithic entity. Miners have to voluntarily commit their resources to GHash. It's not like a single individual can commandeer the entire mining army without fear of repercussion.
Maybe they were. . . or maybe they've figured out something others haven't. Some sort of shorting-type scheme, perhaps.
Normally I'm not so inclined toward conspiracist thinking, but considering all the different capers that have put Bitcoin in the news over the past couple years, in this particular case I'm inclined to make an exception.
It's hard for something to be let die when some have made big money already or have lost and want to recover. Bitcoin is gambling and attracts a rare mindset and this prevents it from going mainstream anytime soon - similarly only a small percentage of people trade stocks. Regular people hardly want to get associated with the gambler crowd. We've seen this before where gambling and technology met.
As I've been closely monitoring the ups and downs of Bitcoin price, what always stops Bitcoin free fall is the feeling that you're gonna miss a huge profit, it's not the reason, and dips become smaller, and smaller as speculators who missed the train last time don't wanna risk too much next time. When you have a bunch of greedy people with money, again, it's hard for this thing to die unless more profitable alternatives appear on the horizon. The one unique thing here is China and their limited options for high tech speculation. If China really kills Bitcoin over there, it will mark the final death of Bitcoin.
How is it that you know what GHash's interests are?
They could have short-term profit in mind, or else crippling bitcoin itself. There is plenty of room for them to have interests that are out of line with the rest of the bitcoin community.
It's in Bitcoin community's, and GHash's, economic interest that no miner exceeds 50%. That's all you need to know to know that this is just another exasperated hand-wringer proclaiming the premature death of BitCoin.
BitCoin, RIP 2008 - 2009, 2010, 2011, 2012, 2013, 2014, ?