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You Had

4:36

a dynamic where money's become freer than free

4:39

We talked about a Fed just gone nuts

4:42

all all the central banks going nuts

4:45

So it's all acting like safe. He's in

4:47

I believe that in a world where

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devalue their currency Bitcoin wins in the

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victor Mean that's part of

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the bull case for Bitcoin. You're

5:00

not paying attention. You probably should be Mr.

5:05

Corallo takes seven I believe welcome back to

5:07

the show Thanks,

5:10

thanks for having me So

5:13

you seem a little down Yeah,

5:17

that's probably true I think

5:20

this may be The

5:22

peak of my bearishness on Bitcoin as

5:25

a notorious Bitcoin bear. I think this

5:27

might be this might be the peak

5:30

I mean the first time you're on you said Bitcoin at a 5% chance

5:32

of success Are

5:34

we below that now? I We

5:37

might be we might be I Think

5:40

I think things are looking real bad right now. All

5:43

right, let's get a visualization of How

5:46

bad things are looking particularly at the mining?

5:49

pool layer, so this is a

5:52

tweet from O

5:54

X B 10 C It's

5:58

done a great job of analyzing using

6:02

the Bitcoin blockchain and particularly

6:04

keeping an eye on mining pools to see

6:06

what they're up to, how they're constructing blocks.

6:10

Him and Mononaut from mempool.space have

6:12

been sounding the alarm that it

6:14

looks like if you look at

6:16

the Merkle branches that

6:19

mining pools send to miners as part of their

6:21

stratum job but it's

6:23

clear that the btc.com

6:25

pool, Binance pool, Pool in, EMCD,

6:28

Raw pool and possibly Brains have

6:31

exactly the same template and

6:33

custom transaction prioritization as Antpool.

6:36

So this equates to about

6:38

50% of the mining hash

6:41

rate as represented by mining pools, essentially

6:43

handling how blocks are constructed

6:46

and the payouts as well. So this

6:49

dictates payouts from a central

6:52

party as well. Yeah,

6:55

so basically they're all the same pool from

6:57

the perspective of Bitcoin. These

6:59

are all the same pool. Not

7:03

good. No, no, it's

7:05

not good. So I mean, I think it's so

7:07

it's important to kind of

7:09

point out why this is a problem, I

7:11

think. Bitcoin's

7:14

value proposition, I would

7:16

argue, and I hope not

7:19

so controversially argue, is

7:22

that it is a censorship resistant money,

7:25

right? Or more colloquially,

7:27

Bitcoin is f-ing money. It

7:29

is money that I can control that

7:31

you can't stop me from using however

7:34

I see fit. It is freedom money.

7:38

And that comes from censorship resistance.

7:40

It comes from this concept of

7:42

I can send the money wherever

7:44

I want and there's no entity

7:46

or no group of entities that can stop

7:48

me. And the answer right now is it's

7:50

clearly not true. There's

7:52

one pool that has near 50%

7:54

of hash power. Throughout

7:57

all of Bitcoin's history, we've had a lot of

8:00

centralization in pools. So, you know,

8:02

obviously pools ensure

8:05

that miners get stable rewards and miners want this

8:07

and it's really important for the business of a

8:09

lot of miners. But

8:13

they also select the transactions, they also select

8:15

what goes into the Bitcoin blockchain and they

8:17

can censor. Right.

8:19

And so there being a

8:21

large pool that's nearing 50% that's

8:24

getting to the point where they could completely

8:26

censor the Bitcoin blockchain if they wanted to

8:28

just by their own decision making should

8:31

frighten everyone and

8:33

should be high on the

8:35

list of worries. You know, I don't know why I know

8:37

the price is up, but people should not be

8:39

bullish with this news. No.

8:42

And was

8:45

this news an accident? Because the

8:47

way I understand this became apparent

8:50

to Mononot particularly was that he

8:54

recognized that there was a large consolidation

8:56

of Coinbase transactions. So it might have

8:59

been a mishap on behalf

9:01

of this monolithic pool consolidating

9:03

all these Coinbase's that were assumed

9:06

to be from separate

9:09

pools that fall under this umbrella. Yeah.

9:12

So Mononot noticed that clearly

9:15

all of these pools are using the same custodians. So basically

9:17

all the money from all these pools is going to the

9:19

same place and

9:21

concluded like, look, they're at a minimum the

9:23

same custodian. Now that wouldn't

9:25

be great for Bitcoin, but isn't

9:27

necessarily all that concerning. You

9:30

know, it's still if they're separate entities and

9:33

importantly, if there's separate entities selecting the transactions

9:35

and creating the work, right?

9:37

The important part for Bitcoin is

9:39

who selects the transactions that go in the network,

9:41

in the blockchain. And as long

9:43

as there's a lot of those,

9:46

then hopefully we do okay. But when

9:49

there's, but then, oh, it's

9:53

B10C then noted that in fact,

9:55

no, they're not just using the

9:58

same custodian, they're actually. selecting

10:01

identical transactions and clearly using the same

10:03

Bitcoin node to select the same transactions.

10:06

So for all intents and purposes, they're the

10:08

same pool. They're not separate entities. They

10:10

might be separate entities, but they're

10:12

just proxying for the same pool. And

10:16

so maybe not to

10:19

play devil's advocate, but

10:21

to highlight, like why would the

10:23

miners be comfortable doing this? Is there an

10:25

advantage in their part?

10:28

Yeah. I think there

10:30

are business reasons here. So what

10:32

has been what

10:35

I've surmised from talking

10:37

to a few people is that

10:40

miners demand basically this fixed

10:42

paper share payouts. So

10:44

miners want to be paid

10:46

the same amount of Bitcoin per

10:49

share that they submit to their

10:51

pool, irrespective of the current fees

10:53

in the block template, irrespective of

10:56

the block

10:58

or whatever. And

11:01

that's really expensive. And

11:03

you need a very large balance sheet to actually

11:05

pay out fixed paper share. So

11:07

we saw this with Poolin going bankrupts six

11:10

months or a year or two years ago. They

11:15

offered fixed paper share for a lot of their

11:17

mining customers, a lot of their miners. The

11:19

miners often want it

11:21

for their own business reasons. It's just more convenient

11:23

to deal with on their part. And

11:27

then Poolin just didn't have the balance sheet for

11:29

it. Poolin got a little unlucky for a while

11:31

or someone did a blog withholding attack. No way

11:33

to know. And

11:36

then they couldn't meet their

11:38

payout obligations. And so

11:40

they went out of business or they went

11:42

bankrupt. I guess they're now still in business

11:45

or back in business, but now they're just

11:47

a proxy for Antpool. So it's

11:49

all the same. So

11:52

I guess they got absorbed by the

11:54

org after

11:56

going bankrupt. But it's very

11:58

impractical. to moderate sized

12:00

pools to offer fixed paper share. And in fact,

12:02

even as a large pool, if you

12:05

don't have an absolutely giant balance sheet,

12:07

you can't offer fixed paper share. And

12:10

so it appears to have happened is all

12:13

these pools basically said, our

12:15

users are one fixed paper share, we

12:18

can't offer fixed paper share with our

12:20

balance sheet without risking bankruptcy. And

12:23

so instead what we're gonna do is just we're

12:25

gonna become a proxy. We're not really

12:28

gonna be a pool, we're just gonna be a proxy

12:30

in front of another pool and we're gonna be a

12:34

chill organization basically.

12:37

Yeah, the central bank of the mining pool. Right.

12:41

Ecosystem essentially. Right.

12:45

You mind if we get conspiratorial here? I

12:49

wouldn't expect anything off. I

12:52

mean, we had the China mining ban in 2021, a

12:54

lot of media

12:57

focus, media attention, narratives driven from

12:59

that. That's

13:02

one thing that has been talked about since then. Yes, physical

13:06

mining machines were forced to leave the borders

13:08

of China, at least temporarily. We

13:11

saw a network hash rate fell 50 to 60%, soon

13:14

recovered. Those

13:17

miners went all around the world. I

13:19

believe 20% of hash rate has settled back

13:21

in China. There's a

13:23

material amount of hash rate still in China,

13:25

but for all intents and

13:28

purposes, there was a ban on

13:30

hash rate production within Chinese borders. But

13:32

one thing that really hasn't been talked

13:34

about throughout the

13:36

years and probably something I should have brought up, because

13:39

it is very noticeable, is the Chinese mining pools have

13:41

still been in operation and they're at the center of

13:44

what's happening now. Right, and it continues to

13:46

be Bitmain too, right? It continues to be,

13:48

it seems like Bitmain has, with

13:50

the exception of F2 pool, Bitmain has kind

13:52

of recreated this

13:55

conglomerate and this

13:57

ownership of Bitcoin

13:59

mining hash. hour in a way that we, you know,

14:03

during SegWit2x we

14:05

saw Bitmain's behavior and

14:07

during the SegWit drama we saw kind

14:10

of a clear desire from Bitmain to

14:13

act as the arbiter of the Bitcoin

14:15

network, right? They had this very clear

14:17

desire to decide what happened

14:19

to Bitcoin. And I think hopefully

14:22

rightfully most people, or I

14:25

think hopefully most people, but certainly rightfully,

14:28

concluded that, dear God, this

14:30

is like no one, why does

14:32

someone want to be in charge of Bitcoin? This

14:35

is kind of antithetical to the whole

14:37

thesis of Bitcoin. And now they have

14:39

40% hash rate again. Yeah.

14:43

And we all seem to be okay with that. Yeah.

14:46

Well, it's funny because we do have a precedent of this

14:49

in Bitcoin's history with G hash. Wasn't

14:51

that 2015? Right. And I

14:53

think what puts

14:56

that up, what's a little different there

14:58

is G hash asked miners

15:00

to leave and some miners did leave.

15:04

And, you know, G hash isn't around

15:06

anymore because everybody said that. Certainly, eventually.

15:09

But not right away. It did take a little bit

15:11

of time, but, you know, there's always, there's often this

15:14

narrative in Bitcoin where people say,

15:16

well, well, well, it's okay that

15:18

pools are very centralized and that there's only

15:21

a few pools and whatever,

15:23

because mining hash rate can just switch

15:25

to a new pool overnight in five

15:27

seconds. Mining miners will, you know, if

15:29

the pool tries to do anything bad,

15:31

miners will immediately switch to another pool

15:34

and no one should worry about this

15:36

because this, this is how it's going

15:38

to happen. And I mean,

15:41

clearly that's obviously not the case. Right.

15:43

Not only do we know that that's

15:45

not the case for practical purposes, right?

15:47

These mining pools and their miners are

15:49

large businesses with negotiated contracts. I'm saying

15:51

negotiate over the course of months. You

15:53

know, you can't move overnight. Often you'll

15:55

have a backup, you know, you might

15:57

have two contracts you have, you have

16:00

have a contract with some backup pool, hopefully

16:03

a backup pool, though we now know that many of the

16:05

pools are just fronts for each other and it's all just

16:07

one pool anyway. But, you know, obviously,

16:13

miners aren't going to switch overnight, of

16:15

course, reconfiguring all these machines and negotiating

16:18

a new business contract. But also, miners

16:21

haven't switched. In the last two weeks,

16:24

the Ant Pool and

16:26

Bitmain Pool conglomerate has

16:28

not materially reduced to

16:30

pass power, has not materially lost hash power. So

16:35

clearly, this thesis of like, well, it's okay

16:37

that, you know, pools are

16:39

centralized, because miners will just do the right

16:41

thing for Bitcoin is bullshit. Well,

16:46

and it's gotten to

16:48

a point too, where the alternatives, I think

16:50

that's the sneaky part about what's

16:53

going on with this mega pool is that

16:57

it's filled with a lot of non

16:59

KYC pool operators. So many

17:01

miners view

17:04

this as favorable, these these

17:07

options as favorable because they can sign

17:09

up with no KYC. And the alternatives

17:12

are companies like Foundry, which require

17:14

KYC. Right.

17:18

That adds a little variable

17:22

to the game theory of the

17:24

decisions that are being made. And

17:28

as you mentioned, when it has become

17:30

hyper industrialized since the g hash days.

17:33

So right, it's a lot of these

17:35

various have boardroom decisions that need to

17:38

be made. It's not people

17:40

running moonshine operations that were

17:42

able to make decisions on a whim like

17:45

they were back in 2015. Right,

17:48

right. Yeah, and I think,

17:51

you know, it's it's

17:54

frustrating too, because I think for a long time,

17:56

you know, there are business

17:59

reasons why my miners join a pool. Obviously,

18:01

it's not, you know,

18:03

miners need consistent payouts or

18:05

they at least want consistent

18:07

payouts and in many cases need

18:10

or they just simply will go under because they won't be

18:12

able to afford their electricity one month because they got unlucky

18:14

and didn't find a block. So

18:18

pools have to exist for some, you

18:20

know, for some miners to be

18:23

effective. But the,

18:26

you know, as a technologist, as someone

18:28

who works on Bitcoin

18:30

software and Bitcoin protocols, you know,

18:33

the technologists, we've done our job,

18:36

right? We've created systems

18:38

for miners to be able to mine

18:41

without giving up their control over

18:44

transaction selection to the pool. So

18:49

in the olden days, there was P2 pool. People

18:51

stopped using P2 pool in part because of misunderstanding.

18:54

They'd see high orphan

18:56

rates in the UI

18:59

and confused that for not

19:01

getting paid. You know, if you have a 5% orphan

19:03

rate, people thought that that meant you

19:06

lost 5% of revenue, which wasn't the case.

19:08

You know, if you have a 5% orphan rate and everyone else

19:10

has a 5% orphan rate, everyone still gets

19:12

the right revenue and it's fine. So

19:15

there was a little confusion in the UI. It

19:17

did have some issues. Some people had a

19:19

higher orphan rate, which did cause

19:22

you to lose revenue. It also couldn't

19:24

pay out a lot of small miners. Basically, you could only use

19:26

it if you were a fairly large

19:28

miner once it got big. So

19:31

you know, it had some issues, but people could still do

19:33

it. People could go set up private P2 pools. You know,

19:35

if you're a large miner and you want to

19:37

work with three other large miners and set up a pool, but

19:39

none of you want to trust each other, none of you want

19:42

to trust the other ones to

19:44

operate the pool and manage the

19:46

nodes and make sure

19:48

that the payouts are correct, whatever, you

19:50

could run a private P2 pool, completely

19:52

untrusted, just between the three

19:54

or five or whatever miners

19:57

and it would work no problem. So

20:01

that's a solution. Stratum B2

20:03

is finally in beta. So the

20:05

SRI product that spiral,

20:09

my employer funded for many years,

20:11

but you know hundreds

20:13

of thousands of dollars paying people to work

20:15

on this and to build this software suite

20:18

exists. It works. People can

20:20

try it out now. Wouldn't call it

20:22

production ready. You know, it's still got, it's still

20:24

early days, but we don't see miners

20:26

testing it, right? You know, if miners,

20:29

if it were the case that this thesis

20:31

that like miners care deeply about Bitcoin and

20:33

they'll switch pools overnight if they have to,

20:35

if that were true, we'd

20:38

see miners running around testing Stratum B2

20:40

today, right? We'd see miners saying, look,

20:43

we care deeply about Bitcoin. We've invested

20:45

all this money in A6. We care

20:47

about Bitcoin's value and value proposition, not

20:49

just the dollar value of the coin,

20:52

but the long-term value because, you know,

20:54

Bitcoin censorship resistance matters. Then

20:57

we'd see every miner testing Stratum B2, right?

20:59

We'd see every miner taking three of

21:02

their machines, three of their rigs pointing

21:04

at demand. You know, there is a

21:06

production pool that runs Stratum B2. You

21:08

can go mine on this

21:10

pool called Demand Pool. That was one

21:13

of the guys who was working on Stratum B2 and

21:15

then somebody who's been around the mining space for a

21:17

while went and founded a pool to offer the service

21:19

to people. We'd

21:22

see people doing that and we don't, right?

21:24

We don't see anyone caring

21:26

about the issues of mining centralization for

21:28

the mining side today, which is very

21:30

frustrating. So it feels

21:33

like, you know, technologists have done the

21:35

work and the

21:37

vast majority of miners, certainly there are miners

21:40

who care deeply about these issues and, you

21:42

know, maybe aren't aware of these things or

21:44

don't have time to invest to switch their

21:46

architecture. You know, maybe it's on the roadmap.

21:49

They just haven't gotten to it yet. But

21:52

I think the vast majority of miners is clearly not true.

21:55

And the vast majority of miners

21:57

clearly have demonstrated very little care

22:00

for the Bitcoin network Now

22:05

I'm just thinking what a lot

22:07

of the focus has been on Last

22:09

few years in the mining industry particularly

22:11

is really on the energy and ASIC

22:13

procurement side. It's been right

22:16

somewhat myopic in

22:18

terms of driving down your input cost

22:21

And neglecting me the

22:24

back end actual health of the network

22:27

Right. I mean look if you're a miner you you've

22:29

got Shareholders or certainly your

22:32

own profit to care about you know,

22:34

you've got to care about all the

22:36

things you mentioned You know power contracts

22:38

making sure your farms operating efficiently cutting

22:40

expenses on employees You know, you don't

22:42

want to spend too much money on

22:44

a bunch of very high-priced engineers who

22:46

are gonna do stuff like this Totally

22:49

understood but at some

22:51

point, you know, the Bitcoin network Has

22:54

to be important for Four

22:57

miners then the long-term value of Bitcoin.

22:59

Hopefully they care about that and

23:03

You know this needs to rise to the top

23:05

of the priority list They need to rest up

23:07

in the priorities list right fucking now Because

23:09

it turns out all the pools are lying turns

23:12

out half the pools are lying to their customers Like

23:15

I went around and spoke to a bunch of miners a bunch of

23:17

them did not know That their pool

23:19

was actually just a proxy for an pool

23:21

that they weren't mining on you

23:24

know These these pools

23:26

like pool and it's actually just an pool

23:28

now or BTC comm I mean

23:30

those were always the same owners. Obviously BTC comm

23:33

and an ad pool, but You

23:37

know miners just weren't aware of this and then so

23:40

the fact that this isn't now at the top

23:42

of the priority list to go You know

23:44

test out strategy to build a

23:46

private t2 pool network fun grade pool There's

23:48

a another project where somebody is trying to

23:50

revive p2 pool, but fix a lot of

23:53

the issues That made

23:55

p2 pool a little less

23:57

practical to mine on for a large business That

24:02

is still early. It's not certainly not available

24:04

for use yet. But you know, I

24:06

don't see any miners funding it. I don't see any miners

24:09

encouraging engineers to work on it or

24:11

anything like that to try to make

24:14

that an option for them so that

24:16

they have, you know, decentralized alternative to

24:18

the pools that they're trusting. Yeah,

24:22

Logan, pull up the pie chart

24:24

again. Because this is really where it gets just

24:26

bang. If you just look at the options. I mean,

24:29

foundry, yes, you could go to them.

24:31

They're testing stratum

24:33

v2, at least the

24:36

encrypted hash delivery from the individual

24:38

miners to the pool. Right.

24:41

And that's, so that's the other part too,

24:44

is it's important to recognize that when someone

24:46

says they're testing stratum v2, you have to

24:48

ask, are you testing stratum v2 or your

24:50

endpoints, your customers of the pool can set

24:53

the work they want to mine on? Or

24:55

are they just testing? Well, stratum v2, the

24:57

like, very naive protocol that's

24:59

just stratum v1 with some better crypto

25:02

because that, that doesn't help the coin.

25:04

That helps miners, you know, you get

25:06

encryption, you get a little over bandwidth

25:09

usage. It's

25:11

a little more efficient, fine, whatever. But it

25:13

doesn't help Bitcoin. No.

25:18

And so to be clear, I don't actually know

25:20

whether stratum or that rather foundry is testing the

25:24

full work custom work selection protocol or not.

25:27

I haven't spoken to them about this. I know

25:29

some other shadow v2 folks have. So I'm

25:31

not trying to throw them under the bus. And

25:33

I know, for example, brains, and I don't want

25:35

to throw brains under the bus, they're, they're great

25:38

folks. But, you know, they're

25:41

a small business that has to pay out fixed

25:43

paper share. And I don't know that they're really

25:46

in a position to do that. And they don't support stratum

25:50

v2 with custom work selection. It's

25:53

not something that they've built out.

25:55

And I don't know why I

25:57

don't know if they don't have the resources for it or I don't know if they

25:59

just have to join the pool

26:01

board conglomerate because it's the only way they

26:04

can stay in business. I don't know where

26:06

their heads at, but they

26:08

don't support it either. Currently, it's only demand pool. Yeah.

26:13

Brains, particularly, made

26:16

the switch from PPL and S2F PPS

26:18

last year after being PPL

26:21

and S for the longest time. Right. The

26:25

scuttlebutt around the industry is that they lost

26:28

large clients because they were PPL

26:30

and S. So basically, they've

26:33

been to need a PPS to solve

26:36

that problem. Yeah. I would

26:38

imagine so. And

26:40

here again, it's miners

26:43

making decisions that are best for them and

26:45

throw Bitcoin under the bus to some extent.

26:48

Now, to be clear, you can do Stratum

26:50

V2 with custom work

26:52

selection and still do fixed paper share. It's totally

26:54

an option if a pool wants to offer that.

26:58

But for the most part, this

27:00

demand of fixed paper share just

27:02

means that there can only be

27:04

one pool or two pools or

27:06

certainly one pool insurance service because

27:09

you're demanding that your pool has such

27:11

a deep balance sheet that no one

27:14

can really do it. Certainly, none of

27:16

these small pools that are just pool

27:18

businesses, you have to have

27:20

another business on the side like Bitmain where you have

27:22

a very deep balance sheet. Yeah.

27:26

Now, the pie chart is

27:28

really disconcerting because that's,

27:31

again, like what options do the miners have

27:33

right now? There's few. Yeah, you have. The

27:35

farming teams. It begs

27:39

the question, is there a need for

27:41

a skin shedding here? The

27:43

mining pool industry like a

27:45

snake that needs to shed its skin and

27:48

have new entrants pop up

27:50

like demand, like ocean? Totally.

27:53

I mean, it's a question of miners

27:55

actually doing it. Again, we've got to

27:57

get miners have to willing

28:01

to take a little bit

28:03

of pain in the short term, not average

28:06

revenue pain, but maybe

28:08

PPLNS from demand or

28:11

ocean. Maybe

28:14

it's going to a pool and saying, look, you

28:16

ship Stratum V2 with custom work selection

28:18

in six months or we walk, and

28:21

be ready to switch to demand. Maybe

28:23

demand gets some hash

28:25

power from that and PPLNS or whatever,

28:27

so that you still get the

28:29

same average revenue, but a little

28:32

less consistent. And miners

28:34

at some point need to be willing to do some of these

28:37

things so that Bitcoin operates

28:39

well. So that Bitcoin

28:41

is actually worth something. Well,

28:44

that's the most important part, is I think we

28:46

need to strike the fear of God into

28:49

the mining industry, where there's

28:52

a meme and it's got some validity

28:54

to it, that miners are someone at the cavemen

28:56

in the industry, just plug in machine, pay

28:59

their electricity bill, get Bitcoin out the other end,

29:01

don't really think much. Obviously,

29:05

that's not completely true,

29:07

but I think it's directionally correct

29:09

that a lot of miners, particularly that have come

29:11

into this space the last few

29:14

years, just see this arbitrage opportunity between

29:16

the price of produced Bitcoin, the price

29:18

it's trading at, at any

29:20

given point in time, but

29:23

there's a lot of upfront capital that

29:25

goes into that deposits for electricity contracts,

29:28

deposits for ASICs, paying

29:31

for ASIC delivery, all the infrastructure around

29:33

it, the actual housing and the miners.

29:36

So there's a lot of capital at stake and I think that's

29:40

what miners need to understand is that

29:43

all that sunk cost capital that they

29:45

put into their operations, billions, tens

29:47

of billions of dollars in aggregate is

29:49

at risk if this problem is unsolved. Yeah,

29:54

I mean, whether it's, that

29:57

happens one way or another eventually.

30:00

Probably

30:03

not soon. There's like three different

30:05

ways or four different ways that

30:07

that capital could be a problem.

30:11

That investment could become a problematic investment

30:13

if this doesn't get fixed. Either

30:15

Bitcoin gets censored, whether it's

30:18

regulatory decision or

30:20

whether it's just a decision of

30:22

McCree, the current CEO of Bitmain,

30:25

or whoever the next CEO is just decides they're

30:27

going to start censoring Bitcoin, then

30:31

I think clearly the Bitcoin value would plummet and

30:34

the miners would be less cold

30:36

than nothing, with

30:38

a huge investment in Bitcoin that's

30:41

now worthless. Or maybe the Bitcoin

30:43

community wakes up, maybe the Bitcoin

30:45

community says, look, this is

30:47

bullshit. The miners, we

30:50

have now almost 15 years

30:53

of experience with Bitcoin for

30:56

the vast majority of that,

30:59

at least more than a decade. We've

31:01

had pools and the pools have

31:03

always been fairly centralized and we

31:06

have the technology to fix that, but

31:08

miners haven't adopted it. So we

31:10

need to fire the miners and we need to

31:13

pick a new crop of miners who's going

31:16

to maybe adopt technologies that are available and

31:18

do something better for Bitcoin. So maybe the

31:20

proof of work function changes. Maybe

31:23

all these miners suddenly have a huge pile

31:25

of basics that they have to replace because

31:27

the proof of work function change just to

31:29

specifically force all of them to go bankrupt.

31:35

Pull out the nuclear. Eventually,

31:39

something is going to give.

31:42

If this doesn't change

31:45

and doesn't change in the next 5 to

31:47

10 years, something is going to give. And

31:52

it's probably just one of those

31:54

two. I

31:56

haven't heard the hash function change threatened

31:59

since... the fork wars when

32:01

Luke Dasher was putting it forth. Yeah,

32:05

look I mean it's

32:12

you know when we're talking about a

32:14

blockchain fork, we're really talking

32:16

about two things that are going to be

32:19

valued differently. Like miners don't, you

32:21

know when we were talking about like

32:23

the fork wars and SegWit2X and all

32:25

these things the hash function

32:27

wasn't you know where the miners ended

32:29

up mining wasn't really a determining factor

32:32

because the market was going to decide the

32:34

market was going to pick the fork that

32:36

they thought was more valuable and then

32:39

the hat the hashers or the miners were

32:42

and they could mine whatever they wanted but they

32:44

were only going to get paid as much if they were mining

32:46

the one that the market thought was more valuable. So you know

32:49

they were kind of along for the ride. So

32:52

threatening them then wasn't

32:55

maybe all that interesting. Here

32:57

the clear case of just the miners

32:59

aren't doing the thing that is

33:01

good for the network. They're doing something

33:04

that is in many ways not good for

33:06

the network. And you

33:10

know if it were just like well the incentives are

33:12

off and there's no way for them to do

33:14

something that's better for the network while still

33:18

you know having a sustainable business and a

33:20

good business then that'd be one thing like

33:22

we should fix the incentives. But here that's

33:24

not the case. Here, you know the technologists

33:27

have done their job. Okay,

33:29

SRI is only in beta fine. We'll be

33:31

released soon. But

33:34

the miners haven't you know the miners

33:36

haven't started testing

33:38

these things. The miners haven't explored P2

33:41

pool and the miners haven't been I've

33:44

seen zero miners involved in discussions

33:46

around braid pool zero, right? So

33:51

you know the miners haven't moved towards these things

33:53

and so here clearly there's a case of just

33:56

the miners aren't doing the thing they need

33:58

to do even though you know the

34:00

incentives There's no material revenue

34:02

loss. Maybe it's a little

34:04

less consistent because maybe there's, you know, if you

34:06

switched to P2 pool, it might be PPLNS or

34:09

something. But yeah, if you get enough

34:11

hash power, it averages out pretty well. You'll be all right.

34:16

So yeah,

34:18

I mean, I don't know what it

34:22

seems to me like the Bitcoin network

34:24

is much better off changing the proof

34:26

of work and bankrupting the

34:29

existing crop of miners than waiting until Bitcoin

34:31

gets censored. Yeah. That's going to

34:33

cause a lot of... And

34:36

I don't think that's the short term. No,

34:39

now I'm thinking about it. I don't think that's the short

34:41

term thing. It's very painful, but... No,

34:43

I'm putting on my tinfoil hat now because

34:45

think of how in

34:48

green mining operations have become a

34:50

grid systems, off grid systems. It's

34:53

a pretty good industry now. It's

34:57

a massive industry and

34:59

the vested

35:02

interest in the

35:04

ancillary services beyond Bitcoin

35:06

mining. The

35:12

precarious situation that's something like changing the

35:14

hash function. We'll put them in.

35:17

It's pretty heavy to think about. Like

35:19

you talked about grid instability potential in

35:21

Texas. Yeah,

35:25

I mean, well, look, if you change the hash

35:27

function, you give people time and

35:29

they can buy... The current miners

35:31

may go bankrupt, but somebody else

35:33

will buy new ASICs and build

35:36

similar systems. So you're right,

35:38

it'd be painful, but hopefully

35:40

it wouldn't have to be that painful. No,

35:44

it would be painful. It would be a logistical nightmare. But

35:48

that begs the question too. I mean, we've been getting

35:50

at it, beating

35:53

around the bush for like mining

35:55

pools are notoriously terrible businesses that

35:58

need ancillary. Added.

36:01

Value services actually be

36:03

profitable Businesses going to

36:05

sneak scheme analogy like

36:08

are. The current crop

36:10

of pool operators the people it's

36:12

actually be operating under, be. A

36:15

Conglomerate. Those not a conglomerate but

36:17

should be like individual energy companies

36:19

run a pool. I'm

36:21

sure to follow any guess you

36:23

know and somebody and. For.

36:26

Yeah, well I mean, you know it's it is. As you

36:28

mention, it's not a. Good. Business in

36:30

many cases so you don't exchange

36:32

or an existing business but once.

36:35

To. Optimize for returns

36:37

is not necessarily going to invest in

36:39

running a pool for we saw this

36:41

with with finance Refinance runs a pool.

36:44

It's just a proxy for for and

36:46

pool. I know we've known that for

36:48

a while. I think they said that

36:50

publicly am by in ah now we

36:52

know that even more polls are actually

36:54

just brought his Red Bull. So

36:57

when when you see something like that

36:59

often it's just contracted out so you

37:02

know maybe the answer is more that.

37:04

Lord Myners get together and. Runner

37:07

a private key to pull instance

37:09

in. Ah, maybe they create their

37:11

own in a mutually uninterested pool.

37:13

Where. They all join

37:16

and they all in operate Beautiful nodes

37:18

is offering this you don't have to

37:20

forget, you just gotta run it in.

37:22

Oh it's been shifting to pull was

37:24

popular and twenty twelve twenty thirty let

37:26

me know. It's been around forever. And

37:31

maybe it should just be a side

37:33

part of the business of running a

37:35

minor. You know, maybe you just need

37:37

for the higher one guy or not

37:39

even one guy and I'll maybe just

37:41

your current ops people are capable of

37:43

running p to pool on the side.

37:47

And the business folks run around and

37:49

and joined forces with a few other

37:51

miners to to create you know these

37:53

private mining pools. You.

37:56

know maybe i should have might have you

37:58

personally totally the bigger about this or?

38:03

Not this idea specifically. You

38:05

know I think that is

38:07

a bigger shift in the

38:09

industry and I don't know how many miners

38:12

are ready for that. You

38:15

know I think getting Stratum B2

38:17

over the line is a little bit

38:19

of an easier sell because Stratum B2

38:21

is basically the existing business.

38:23

You know you're still working with

38:26

a mining pool. You're still you know

38:28

doing the same thing you

38:30

do now but you

38:33

just run a little different

38:35

software. And so I think that's

38:37

I certainly

38:39

thought that was an easier sell. So

38:42

far we haven't really gotten much

38:45

in the way of miners actually testing

38:48

this stuff. You know the software exists

38:50

and developers want testing. I

38:52

want people to try stuff out but

38:55

so far it hasn't been a big

38:58

thing. I think I

39:00

remember it had be 2018 or 2019

39:07

meeting in New York talking about Stratum B2 for

39:10

the first time at a

39:12

vegan restaurant in Midtown. It's

39:14

been a while. It's an old idea you

39:17

know it's an old idea.

39:19

I mean the idea itself

39:21

predates Stratum B2. You know

39:23

previous iterations of the protocol.

39:26

Sadly Stratum B2

39:29

as a spec you know we spiral struggled

39:31

a little bit to find people to fund

39:33

to work on it. You know it took

39:35

a while for us. We were running around

39:37

begging anyone you know hey if you want

39:39

to work on this and software engineer will

39:41

pay you please work on

39:44

it. We struggled for a long time to find

39:46

anyone to do that. We eventually

39:48

did. It's now a open

39:51

source project that is available. It's

39:53

in beta. There's a handful of people working on it.

39:55

We still fund I think one or two of them.

40:00

So it took a while, but it is finally

40:02

there, and now it's

40:04

time for miners to do

40:06

their jam jobs and start testing it and

40:09

start working towards it. Quick break here freaks.

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40:49

Back to the show. Well, you

40:51

say to people who hear this

40:53

and say he's shilling his own bags. He's been

40:55

working on Stratum B2 for the better

40:57

part of a decade. He

40:59

wants to see his baby get into the world. This

41:02

isn't something we have to worry about. We have somebody

41:04

with bias

41:07

putting forth a

41:09

solution they want to see in the world. Yeah,

41:13

I mean again, I don't really care if

41:15

it's Stratum B2 or private P2 pools or

41:17

braid pool. I worked

41:20

on the design of this

41:22

Stratum B2 protocol. I haven't actually worked

41:25

at all on the software. I'm shilling

41:27

other people's software for the SRI, the

41:29

Stratum Reference Implementation. That's some

41:31

other people built. But

41:35

yeah, I mean again, I don't really care how we

41:38

get there. I care that the

41:40

transaction selection, the selection of which

41:43

transactions into the Bitcoin blockchain becomes

41:45

decentralized. Because

41:47

today it's not. And

41:49

I hope

41:53

that, and I think Bitcoin only has

41:56

value if it is. I think as a...

42:00

I think StratumV2 is the most

42:02

likely way to get there because

42:05

I think it continues

42:07

the existing

42:09

business models that people are used

42:11

to and people are comfortable with.

42:16

You can continue to use a pool. If we

42:18

switch to a bunch of private P2 pool

42:20

instances, then variance is going to be higher

42:22

and people might not like that. But

42:24

with StratumV2, your variance doesn't have to be any higher.

42:26

Your variance can be the same. You can still do

42:29

fixed paper share as long as your pool has a

42:31

deep balance sheet, but in theory you can still do

42:33

it. So

42:36

I think it's the most likely, but

42:38

I don't know. If

42:41

something else gets adopted, I'm very happy to see that. But

42:44

at the end of the day, right now,

42:47

nearly every proof

42:50

of stake system is substantially

42:52

more decentralized than Bitcoin. And

42:56

I don't know why Bitcoiners are okay with

42:58

that. Do you

43:00

think there's a perception that it's a big

43:02

lift to even test this and then eventually

43:05

implement it? And if so, is

43:07

that a misconception? Maybe.

43:11

I don't know that I've spoken to

43:13

enough miners to have an understanding. I

43:15

know, again, most miners don't

43:17

necessarily have a big tech staff. They don't

43:19

have a bunch of engineers who are going

43:22

to go implement stuff. Many

43:25

miners have some software

43:28

engineers because they build their own

43:30

mining farm management in-house. Some

43:32

don't. Some use third parties. But

43:36

it shouldn't be a huge lift here. We're

43:39

talking either one virtual machine in

43:41

the cloud or one little, you buy

43:43

the little Intel

43:46

Nux, the little PCs

43:48

that are this big. They're like raspberry pies,

43:50

but they're actually powerful. They're not garbage. You

43:54

buy one of those and you run

43:57

some open source software on it. There's packages you just download

43:59

the book. a binary and run it. And

44:02

then you configure it, you point it to Demand Pool. I

44:04

don't know if you even need an account. I think you

44:06

probably need an account. But you open the account with Demand

44:08

Pool, you point your miners at it, and

44:11

you run Bitcoin Core. And

44:14

it's not zero, it's certainly not

44:16

a two minute project if

44:18

you're not an engineer, you're

44:20

not kind of used to these kinds of

44:22

setups. But it's also not

44:24

a one day project. It's a

44:27

few hour project, test it out, try it

44:29

with a few of your mining rigs. Take

44:32

a few of them off the shelf, point them to your

44:35

machine, join the Discord. There's a bunch of engineers

44:37

there who would be happy to do as

44:40

much customer support as you need

44:42

to get going. Yeah,

44:46

it shouldn't be too hard. I

44:49

can see why people might be intimidated a little

44:51

bit, but it's time to get

44:53

off zero. It's time to slot this into

44:55

people's business plans

44:57

for the next six months. If

44:59

you're a miner and you gotta figure

45:01

out when you have time to do this, but in

45:04

the next six months, you should be able to make

45:06

some time to at least get this tested, get going,

45:10

get a few of your devices on Demand

45:12

Pool, test it out. Yeah.

45:17

Yeah. Yeah,

45:21

it is

45:23

scary to think about. And I do think,

45:28

to put my miner hat on,

45:30

I think again, people have been

45:32

so myopically focused on the

45:34

cost side of things, particularly on the energy side, that

45:38

they've just overlooked this. And

45:40

again, it's snuck up. I don't think people understood

45:42

that. I don't think

45:44

anybody understood that. There was this large proxy pool

45:48

that people were, this large pool that people

45:50

were boxing into until a couple weeks ago.

45:53

Right, which is all the more reason that

45:55

miners should be freaking out. If your pool is

45:57

lying to your face about who your counterpart is,

46:00

is why you don't want

46:02

to do business with somebody who's going to lie to

46:04

you about who your counterparty is. That's not, you know,

46:06

if your counterparty is secretly Bitmain and

46:09

your pool is not willing to tell you that, you

46:11

don't want to do business with them. Yeah.

46:14

Now again, conspiratorial, like was

46:16

this China's, was

46:19

it a smoke and mirror campaign? Smoke

46:21

for banning mining, kick

46:26

all the actual ESX out and then control

46:28

the pools. Just answer Bitcoin

46:30

eventually. Could

46:33

be. Maybe. I don't think we need to

46:35

jump to conspiratorial in

46:37

the Chinese government sense. We know Bitmain

46:39

has a long history of a

46:43

desire to control Bitcoin and

46:46

a deep misunderstanding

46:52

of why this is

46:54

bad. Certainly a big part of that

46:56

was Xi'an when Xi'an was CEO. He's not

46:59

there anymore. He's not supposedly not

47:01

there anymore. So, you know, maybe that

47:03

culture has improved, but historically that's been

47:05

a part of the company,

47:07

a part of Xi'an's whole MO was

47:09

he wanted to own Bitcoin by owning

47:12

the pool that everyone mined on and having

47:15

everyone bow down to him and forcing

47:20

everyone to use a pool. You know, basically if you want the

47:22

new, if you

47:24

want the new ESX, you've got to use our

47:27

pool and you've got to let us have,

47:29

you know, control Bitcoin or

47:31

use one of our proxy pools or one of the

47:33

pools we, you know, at the time, I don't think

47:35

that we're necessarily proxies, although I don't know that anyone

47:38

checked at the time, but you

47:41

know, they certainly had a number

47:43

of pools that they were, let's

47:45

say very, very chummy with. Yeah.

47:49

Not even Xi'an now at Bitdear.

47:51

There's still arm's length connection

47:54

to Bitmain. Pretty sure

47:56

they're supplying all the Deers machines. So. Still

48:00

a close relationship. I'm

48:02

sure. Yeah,

48:07

it's not good. No,

48:11

it's not. But luckily, again,

48:14

luckily, the technologists have

48:16

done their job here. And miners

48:18

have options, or at least one option

48:20

right now. And hopefully with eventually,

48:23

braid pool. I don't know

48:25

where braid pool is in terms of

48:27

shipping. But hopefully, that's an

48:29

option too for folks. And

48:33

yeah, so miners will

48:36

have options. And miners should be exploring those options

48:38

now. That needs to be on the roadmap in

48:41

the very short term because

48:43

we're in such a bad place right now. I

48:47

think the Bitcoin community needs to start

48:49

thinking about what the long-term plan is

48:51

here if miners don't start taking these

48:54

options. Yeah. What

48:56

hash function would you prefer to

48:58

use? Honestly,

49:03

just leave SHA-256, but use a 64-bit timestamp. Let's

49:06

just fix the timestamp issue. Keep

49:08

SHA-256. Who cares? And

49:11

we'll just

49:13

break all the miners and replace them with

49:15

new ones. Yeah. And

49:22

for what is it, Murphy's Law? Anything that can go

49:24

wrong will go wrong. That

49:28

would be just sort of a pure masochistic,

49:33

just infinitely curious to see what

49:35

the worst case scenario would be like and how

49:37

it would play out. That would be. And

49:40

to be clear, you don't want it to get to that point, Freaks,

49:43

but as Matt puts forth, if things

49:46

don't change, it could very well get to that point. And

49:49

for historical context. Again, the last

49:51

time this was discussed,

49:57

changing the hash function is known as the nuclear

49:59

option. Where it's like a last resort

50:02

Miners are fucking around you hit

50:04

the button you change the house function Yeah

50:08

Induced a little chaos it is it

50:11

is hopefully the last resort But you

50:13

know again, I don't I

50:16

don't understand why anyone can be bullish on Bitcoin right

50:18

now The

50:20

UTS are here Matt Yeah,

50:23

price is going up, but Yeah

50:27

Price is going up, but I or price

50:29

had been going up, but I like I

50:31

don't understand You know if

50:34

you're in this for just the price What

50:37

are you doing? You know and even if you

50:39

are in this for just the price where do you think the

50:41

price comes from the price is only? goes

50:43

up because people view Bitcoin as fuck you money

50:45

if Miners can censor

50:48

the blockchain then Bitcoin is not fuck you money.

50:50

Yeah Not

50:52

completely agreed and that to be clear I was being facetious

50:56

the the

50:59

Yeah, the number go up amnesia Mark

51:01

Goodwin Use that

51:03

term for the first time on the show last week I thought it was

51:05

a very good term, but that is the

51:08

thing that number go up does it induces

51:10

amnesia where people Don't

51:13

care about the properties that make Bitcoin valuable in

51:15

the first place. They just care about the dollar

51:17

value And forget about

51:19

right are important All

51:22

right, yeah, we

51:24

need a slogan Any

51:28

good any good attempt to

51:30

drive share them I slogan are the

51:32

miners are Yeah,

51:36

light a fire on other miners ask threatening to

51:38

fire the miners The

51:43

I was gonna say something a bit too uncouth to

51:45

put on there, but I

51:48

That's a thing these Chinese pulls have a lot of

51:51

control and historically they've been very opaque and Hard

51:54

to deal with hard to get in control of unless you're Chinese

51:58

So that's the interesting thing like I find it hard

52:00

to believe that any

52:02

of the Chinese mining pools, particularly those

52:04

directly controlled by Bitmain,

52:06

so btc.com, an AMP pool,

52:09

would ever willingly adopt something like Shrum v2. Yeah,

52:14

maybe not. And if 20% of the network

52:16

hash power is

52:18

still on these legacy pools, OK,

52:20

well, that's what it is. But

52:23

if 60% of the network

52:25

hash power is

52:27

on these legacy pools, then

52:31

maybe Bitcoin needs new hash power. Do

52:34

you think this could be solved in a legal way in

52:37

terms of the way these

52:39

pools are

52:42

actually constructed from a legal perspective? Because I've heard

52:44

the idea floated, where you create this pool

52:47

that would be similar to AMP pool in

52:50

these regards, but it's a nonprofit

52:52

with a very specific mandate,

52:54

which is to gather

53:00

transactions that get

53:02

the highest fee within a block and then

53:04

broadcast the transaction. Then you could proxy pool

53:06

into that and do things

53:08

on top of it. You

53:11

know, you're still subject

53:13

to whatever jurisdiction that pool is based on.

53:16

So now we have this one big mega pool based

53:18

in the US. And the US government, in

53:21

four years or in eight years or in 12 years or

53:23

in 16 years, we elect

53:26

somebody who decides they want to censor Bitcoin.

53:28

And the US government says Bitcoin is not

53:30

censored. And so it is. As

53:33

long as it's the case that

53:35

we have these large single entities

53:38

that are responsible for these things,

53:40

yeah, we're setting

53:43

ourselves up for trouble. Yeah.

53:47

I wonder if some of these larger miners should just, I

53:49

mean, that's a shame. Of

53:52

the large scale miners, most

53:54

of them are public. And so

53:56

they beholden to quarterly filings and

53:58

shareholder updates. and they can't

54:01

really stomach the variance risk. I think

54:03

that's why brains suffer

54:05

the rehydrate leak when they were PPLNS

54:07

is, they

54:10

had publicly traded miners that can stomach the variance.

54:14

But ideally if you have them- Yeah, and I mean, I

54:16

get not stomaching variance, but

54:19

PPLNS is not super high variance. It's

54:21

only high variance when your pool is

54:23

particularly small, right, which brains was.

54:25

Brains wasn't a very large pool. So

54:29

they ended up with high variance, but you can

54:31

have a much larger

54:34

pool, it's PPLNS and- Sun

54:38

die, sun probably die. Then

54:41

miners, in those cases, we

54:44

see, so

54:47

even when you see these big pools, even when you

54:49

see these big pools that have very little variance, you

54:52

still see miners demanding FPPS because it still

54:54

just seems a little better for them, right?

54:57

And it is really detrimental to

54:59

Bitcoin, detrimental to their pools. We

55:04

lost you there for a few seconds, but I think I grok to

55:07

what you're saying. Yeah. This

55:12

is gonna be a hard problem to solve. Again,

55:14

because you have a lot of capital sunk into

55:16

this, you have a lot of business relationships, a

55:19

lot of tough conversations that are gonna need to be had by

55:21

larger miners in the pools that they point

55:23

their hat at. Yeah. I

55:25

mean, it is a tough

55:28

problem to solve, but also not a

55:30

tough problem to solve, right? It's

55:32

tough in the sense that there's a lot of what

55:35

people do now, and they wanna keep doing what they do

55:37

now, but also not tough, and

55:39

that strategy too gives you a release value.

55:41

You just change the software you're running

55:43

and you can keep doing the same thing you were

55:46

already doing. You can keep the same payout structure. You

55:48

can keep the same, all the same, contracts

55:52

you have in place with your pools, you

55:55

keep the same pools, and

55:57

all you do is you change the software and suddenly Bitcoin's

55:59

key set up. centralized again. And

56:02

so that's the beauty of something like Stradom v2

56:04

when you do custom work selection is nothing

56:06

really has to change, but miners

56:10

just have to change the software. Yeah.

56:18

Again, I'm trying to think of how to even start this

56:20

conversation. I mean, this is a way to start the conversation,

56:23

but actually drive change.

56:28

Well, you send them this podcast. You tell them that we're going

56:30

to change the fucking proof of work out from under them. So

56:33

they better fucking get off their ass and

56:35

do something about it. Yeah.

56:39

I don't think the logistics that would go into that, there

56:42

would have to be a tangible

56:45

alternative in terms of like ASICs that you

56:47

could actually acquire and plug in once

56:49

the proof of work function

56:52

hasn't changed. Do they exist? Yeah. Yeah,

56:55

I mean, we can get there. If

56:59

miners really aren't going to do anything, then we can

57:02

absolutely figure out the logistics. Like the Bitcoin

57:04

network, Bitcoiners need

57:07

a decentralized system. That's why all the Bitcoiners are

57:09

here. And if the

57:13

miners can't

57:15

provide a decentralized system, if miners have no

57:17

interest in providing a decentralized system, then

57:20

Bitcoiners can figure out the logistics. There'll

57:22

be a lot of value in being

57:24

the first one with an ASIC for

57:26

a new proof of work function. And

57:30

so I'm sure people would build it. I'm

57:33

sure people would buy it. I'm sure people would plug it in. Yeah.

57:38

Then you have another. Yeah,

57:41

this is a shit show. Does anyone have

57:43

a problem there if somebody corners the market of this

57:45

ASICs that you changed it and just like centralized when

57:47

you relaunch? Yeah,

57:50

I mean, it

57:52

can't be worse than today, right? 50% in one pool. I

57:56

think it can't be a hell of a lot worse. Yeah.

58:00

Before Strad and V2, what

58:04

option do miners have now to

58:07

help reduce this problem? I mean, point your hash

58:10

at one of the five pools. Yeah, I mean get off.

58:13

Yeah, get off one of the main

58:15

proxy pools. Get off. Yeah,

58:22

really that. Foundry

58:25

is not great either, but look

58:27

at that. You know,

58:30

just care about where your hash is pointed. Just

58:33

care. If

58:36

any material number of miners gets

58:38

off these bitmain proxy pools and

58:40

off f2pool or off

58:43

f2pool, off foundry, then suddenly

58:45

we'll have another big pool.

58:48

It doesn't take, it takes a bunch of people getting together.

58:50

If you're really, you know, if you're a miner and you're

58:52

saying, you know, all right,

58:54

you know, maybe I'm going to test Strad and V2 over

58:57

the next 6 to 12 months. It's

58:59

going to take me a while to get to it. What

59:02

can I do now? You know, I'm currently mining

59:04

on one of these pools that was lying to

59:06

me. That's actually a proxy for bitmain, proxy for

59:08

antpool. What

59:10

do I do? Well, you know, go to

59:12

a bunch of other miners, say, hey, look, here's

59:15

a problem. We need to do something about

59:17

it collectively. Let's all switch to, you know,

59:19

demand pool or something. Demand also offers Strad

59:21

and V1 endpoints. You know, you can go,

59:24

you know,

59:26

use demand as an example. There's, I'm sure there's

59:28

a handful of other small pools that aren't proxy

59:30

pools. I'm

59:32

not super up on the list of all the

59:34

small pools in Bitcoin that don't have material hash

59:37

power. But, you know, you pick a new

59:39

winner. Like, it doesn't, you know, a bunch

59:41

of miners get together and say, that's the one we're going

59:43

to use. You all switch to it. And

59:46

overnight, there's a new big pool and

59:48

you don't suffer any increase in variance.

59:51

No. It's

59:53

a shame. Like one of the big alternatives right now would

59:55

be ocean. I mean, it's not big, but one of the

59:57

alternatives is Ocean Pool. Yeah. Ocean

1:00:00

is another option. No, but people

1:00:02

won't go to that because they're not mining

1:00:04

the most profitable blocks. So that's... Right. You

1:00:07

got Uncle Tinfoil Marty right now.

1:00:09

He's like, is this whole Ordinal's

1:00:12

BRC20 a way

1:00:14

to lock people into these pools who they're

1:00:16

more willing to? No,

1:00:18

I mean Ocean is the only

1:00:20

miner that's not willing to include

1:00:23

that stuff. So any

1:00:25

other pool or Ocean's the only pool. Any

1:00:27

other pool will do, right? Take any other

1:00:29

pool. For

1:00:31

the few who are willing to suffer

1:00:33

a little less income for some

1:00:36

kind of philosophical argument, use

1:00:39

Ocean. Fine. Please,

1:00:42

just don't use one of these bid-mane proxy

1:00:44

pools. Yeah. Going

1:00:52

back to... I mean, it is astonishing

1:00:54

how complacent people have gotten. I think

1:00:56

going back to Gash, I

1:00:58

mean, Peter Todd's in between. People left that

1:01:00

pool within hours. Yeah,

1:01:03

it lost a lot of hash rate pretty quick.

1:01:06

It still had a lot of hash rate for a while, but

1:01:10

it did eventually lose a lot of hash rate.

1:01:12

It did kind of collapse. I

1:01:15

think even

1:01:18

then I thought,

1:01:21

I distinctly remember a number of conversations, even

1:01:23

all the way back then where people were

1:01:25

kind of saying, look, miners

1:01:27

are not as in it for Bitcoin.

1:01:30

They're not as willing to change pools when

1:01:32

there's a big problem as they should be,

1:01:34

and this is problematic. Even

1:01:37

back then when it took a month

1:01:40

or whatever for enough hash rate to

1:01:42

really... Gash had to

1:01:44

tell people they weren't accepting new users.

1:01:49

It took a lot of effort to get

1:01:51

people to stop using so much Gash, but

1:01:53

they did collapse. And

1:01:56

they did collapse after a few months. They lost a

1:01:58

lot of hash power pretty quick. But

1:02:01

even then it was a problem. And today, we just

1:02:04

see no movement at all. Like,

1:02:06

oh yeah, this is my pool, my

1:02:08

video. This business that is core to

1:02:10

my business, that is handling all of

1:02:13

the finances, all of the money that

1:02:15

I'm making is coming via this third

1:02:17

party company that it turns out was

1:02:19

lying to me. And

1:02:21

people are kind of okay with that. Yeah.

1:02:25

And that's frightening. Now, just

1:02:28

going back to, what's

1:02:31

it again now, F2Pool. Yeah,

1:02:34

poolbtc.com, brains, the,

1:02:39

foundry. Yeah,

1:02:43

I mean, that's what I'm trying to graph.

1:02:45

Like, how much of the

1:02:47

ASICs that are plugged in around the world

1:02:49

are owned by Chinese companies

1:02:52

or individuals who,

1:02:54

I mean, just being in the industry,

1:02:56

that's the way the Chinese work. They point their hash rate at

1:02:59

Chinese money pools. Yeah,

1:03:03

and it's a shame, and

1:03:05

it's a shame that, you know,

1:03:07

Pulin went under, right? Pulin made a big

1:03:10

dent in that market, was a

1:03:12

third party, and then they

1:03:14

went bankrupt and got apparently acquired, or at least

1:03:16

in some way, shape, or form, ended up being

1:03:18

a proxy pool for Anpool. So,

1:03:22

it's a shame that all these

1:03:24

folks were demanding fixed pay per

1:03:27

share when it's just

1:03:29

not sustainable unless you are more

1:03:31

than a pool as a business, unless you have

1:03:34

a lot more going on in your business because

1:03:36

you need the deep balance sheet. Yeah,

1:03:41

I'm trying to think. Maybe you

1:03:43

get a KNC miner, BitClub,

1:03:49

you have Lincoln Pool, which is probably a good

1:03:51

option for people as well. It's

1:03:54

very small, but. Yeah,

1:03:57

miners, wake up. Yeah. And

1:04:00

you know the miners you know

1:04:02

we need we need a big mining conference a big

1:04:04

meeting of all the miners to come together Sit in

1:04:06

a room and pick a new winner Maybe

1:04:09

Hong Kong maybe we come to an agreement in

1:04:11

Hong Kong or something like that Clearly

1:04:13

in Austin because for all the miners are

1:04:15

right somewhere in West Texas. We'll pick a

1:04:18

Pick a random town somewhere Yeah

1:04:24

These are messy problems Is

1:04:27

the problem in the long term miners

1:04:29

just need to start testing strategy to

1:04:31

need to start moving to these other

1:04:33

solutions I'm

1:04:35

telling you this is gonna get released Well,

1:04:42

you know they can keep saying that right up

1:04:44

until the coin changes proof of work and then

1:04:47

they're gonna be real sad Hmm

1:04:53

Yeah, there's been a lot of fuckery on the the mining

1:04:55

pool side not only with this centralization

1:04:57

of block production templating

1:05:01

but yeah like with the With

1:05:04

the out-of-band transactions, I

1:05:07

mean even outside the Chinese mining pools you have And

1:05:11

there's a new interesting variable within the

1:05:14

mining industry slipstream from Marathon It

1:05:17

mempooled up spaces transaction accelerator, I think

1:05:21

is now So

1:05:25

far those things haven't minted

1:05:28

Real substantial revenue some revenue some real

1:05:30

revenue certainly but not huge

1:05:32

revenue You know, I'm hopeful

1:05:34

that they don't ever mint huge revenue.

1:05:37

We've seen similar things in the past that haven't

1:05:39

minted huge revenue But

1:05:41

we'll see and I think you

1:05:43

know at some point the coin core is going to be

1:05:46

forced to Make

1:05:48

relay policy a little more relaxed. You know

1:05:50

Bitcoin current tends to be very relaxed So,

1:05:52

you know most the relay policy that they

1:05:54

do enforce is you know If

1:05:56

you have a big transaction, it becomes

1:05:58

actually computationally different to calculate an

1:06:01

optimal block template. So Bitcoin Core prefers small

1:06:03

transactions because it's the only way they can

1:06:05

build an optimal block template.

1:06:08

But these things will

1:06:11

have to change as

1:06:13

demand from users

1:06:15

changes because Bitcoin Core will

1:06:18

have to create good block templates. There's no other way

1:06:21

around it. So

1:06:23

we'll see what happens there, but I'm

1:06:27

cautiously optimistic that none of these

1:06:30

more fancy transaction construction things will

1:06:32

ever be a huge part of

1:06:34

mining revenue in Bitcoin. That's

1:06:40

good to know. All right, everybody

1:06:42

needs to go test strategy too. Think

1:06:45

it will be in beta for what, six more months? Maybe

1:06:48

longer? Well, it depends on when people get around to

1:06:50

testing it. If nobody tests it,

1:06:52

it'll sit in beta forever. If people actually start

1:06:54

putting hash power at it and testing it and

1:06:56

saying like, I can select

1:06:58

my own custom work, I can mine on demand

1:07:00

pool, and I found however many shares, then it'll

1:07:02

be at a beta in a month. You know?

1:07:05

So it's a question of people

1:07:07

using it. Should we publicly shame

1:07:09

some people right now? If

1:07:12

you have people you wanna shame, sounds good to me. I've

1:07:16

got Coremet, Coremet, let's test it out. Riot,

1:07:19

let's test it out. Yeah,

1:07:22

yeah, you know, get off zero. Get

1:07:25

the eDRA, sit on the board. I'll bring it up at the eDRA.

1:07:28

All right. I need to test it. I

1:07:34

think that's not a

1:07:36

problem with Strata V2, but I think it's taken so

1:07:38

long. And

1:07:40

maybe there's an error

1:07:43

of, is it really here? I

1:07:45

guess it's been talked about for so long. Yeah. Like,

1:07:48

is this just bullshit? Yeah, totally. We had Foundry implement,

1:07:50

that's the other thing too. Foundry's like, we have Strata

1:07:52

V2 live, and it's like, yeah, that's just

1:07:55

the cryptographic nature of sending

1:07:59

hashes to the... cool. Not

1:08:01

really cool. Yeah, it might or may not be. Yeah,

1:08:04

and to be clear, I'm not actually 100% sure where they

1:08:07

are on that. That's right. And

1:08:09

then Brains also announced that

1:08:12

they have it in Brains OS at least. Maybe

1:08:14

it was Brains. Yeah, but that is

1:08:16

only the standard block

1:08:19

construction form that's not the

1:08:22

custom work selection version. Yeah.

1:08:26

Now another freaking bit mean. They just

1:08:28

announced that, or they didn't even announce that they

1:08:30

just released their latest firmware which makes it impossible

1:08:32

to back door. So that's something like Brains OS.

1:08:36

Right. Or other third parties. More

1:08:38

lock down. Next version they're going to tie it

1:08:40

to their pools. You can only mount on their

1:08:42

pools. You know. You think so? That

1:08:45

would be... I

1:08:47

mean, that's always been their go-to. We

1:08:50

want more users on our pools so that they

1:08:52

can extract fees eventually. Let people in.

1:08:55

Yeah. That

1:08:57

would be interesting. That would be a misstep. And

1:09:00

we give... Luckily,

1:09:03

within your corporate

1:09:08

umbrella, it was a good

1:09:10

announcement to see today. Yeah.

1:09:13

The block mining. Block and hunch. Three

1:09:15

nanometer tape out. That's

1:09:17

good. We need that. We

1:09:19

got the audio line as well. Obviously we

1:09:21

have micro BT. Which I'm partial

1:09:23

towards. I love their machines. I

1:09:26

love them personally. Intel

1:09:28

may be back in the game. Yeah,

1:09:30

Bitmain needs to check. It

1:09:34

is weird because Bitmain... You know, the

1:09:36

mining industry would not be as robust as it is without

1:09:38

Bitmain. Historically, but Bitmain has

1:09:40

been extremely antagonistic and scummy.

1:09:43

Right. A lot of ways. Yeah.

1:09:46

Alright. We

1:09:49

do it every episode that we record. You

1:09:52

were most optimistic two years ago. Nicely least

1:09:54

optimistic. Presentation of Bitmain succeeds

1:09:56

right now. Three.

1:10:01

Three. Three percent. I really

1:10:03

think I don't see miners

1:10:05

aren't getting off zero. And like

1:10:07

you mentioned, there's a lot of miners who, there's

1:10:10

a lot of western miners in the US who

1:10:12

might be off zero here and might start testing

1:10:14

and might start helping out and might start mining

1:10:16

strategy too. But there's a lot of miners who

1:10:19

it's going to take a lot of work to

1:10:21

reach. And we got to

1:10:23

get off zero. We got to get some of these bigger

1:10:25

miners in the west getting moving. But

1:10:28

I don't know. I don't know what's going to

1:10:30

happen to the long tail. And I don't know

1:10:32

what's going to happen to a lot of hash

1:10:34

power in Kazakhstan, China, whatever. We've

1:10:37

got a long way to go to make

1:10:39

Bitcoin decentralized. And

1:10:41

is there a forcing function once Stratum

1:10:44

V2 is adopted by a certain

1:10:46

percentage of the network where it becomes, not

1:10:51

uneconomical, but less economical to

1:10:53

run Stratum V1? Maybe.

1:10:56

Not really. No, I

1:10:58

mean, it doesn't change a lot about the economics. I

1:11:01

would strongly encourage ISPs out there to go

1:11:03

start stealing hash power because Stratum V1 is

1:11:05

insecure and your ISP could be siphoning. No,

1:11:07

I'm not going to have power, so I'd

1:11:09

strongly encourage that. If you're an ISP and

1:11:11

you're in Cadillac fan, go steal some hash

1:11:13

power. Make some free money. But

1:11:17

no, sadly not. Okay.

1:11:19

Maybe that's what we need. The attacks from the ISPs, the

1:11:21

force, decent integration into

1:11:23

mining player. There we go. Let's

1:11:25

do it. We sold them, so we bankrupt

1:11:27

all the fixed pay per share pool. Go

1:11:31

with all the blocks. Go

1:11:33

bankrupt the fixed pay per share pool. Yeah,

1:11:35

maybe. Mac, you want to change my audience today? We're

1:11:37

in a block for your whole NUSPs. They're going to attack and hash for

1:11:39

a joke. We're going to change the hash function. We're going to find

1:11:41

out-liners. Yeah, let's do it. All right. Well, I

1:11:43

knew this was going to be this type of

1:11:46

episode and you can get me

1:11:48

last week. I

1:11:56

had a feeling. Sorry. I

1:11:59

had to have. How's everything else going?

1:12:03

Less good. Less good. You look good.

1:12:06

Can't complain. It's nice in New York. Starting

1:12:08

to be spring. Yeah,

1:12:10

I'm bummed I missed you last week. I missed you by

1:12:12

a couple days. Yeah. Yeah, well,

1:12:14

I had an event in Miami. Suddenly I missed a

1:12:16

bunch of the having parties too. But, oh

1:12:19

well. You were fun. Next

1:12:21

month. We're celebrating our own demise, you know. It

1:12:25

would be poetic. Yep. Alright,

1:12:28

well, thank you for keeping us on our

1:12:30

toes. And if your

1:12:32

mind are listening out there, think about this. Long-term

1:12:37

viability of your business is at risk. Because

1:12:41

Bitcoin is a very important project that push does come

1:12:43

to shove. The nuclear option is there and it will

1:12:45

be hit if it needs to hit. Nobody wants to

1:12:47

hit it. Let's not let it get to that point.

1:12:50

Get off your ass. Stop

1:12:53

focusing on the energy stuff myopically. We've

1:12:55

got a network side of things that

1:12:58

is... Yeah, and it doesn't take many

1:13:00

resources to deal with the network side of things, you

1:13:02

know. It just takes a

1:13:04

few hours a week from your ops folks.

1:13:07

You figure it out. Yeah. Alright.

1:13:10

Well, I'm gonna go text some miners. Maybe

1:13:13

write a newsletter. I think that's what I wrote a newsletter about

1:13:15

today. And then we'll

1:13:17

post this tomorrow. Let's get the message out

1:13:19

there. Cool. Alright.

1:13:22

It's great seeing you under these very

1:13:25

depressing circumstances, but we've got to

1:13:27

get it out there. Yeah. Yeah,

1:13:29

we do. We've got to get off zero. Alright. Get

1:13:32

off zero. We'll fire the miners.

1:13:34

Peace and love.