WEBVTT - Automatic transcript; recognition may contain errors. Reviewed for technical wording and speaker labels. Times match the published episode. 00:00:16.240 --> 00:00:18.520 Live from Utrecht, this is Bitcoin 00:00:18.520 --> 00:00:19.780 Explained. 00:00:20.080 --> 00:00:20.760 Hey, Sjors. 00:00:21.020 --> 00:00:21.780 Happy New Year. 00:00:22.100 --> 00:00:26.120 What an amazing day. A new Bitcoin Explained episode. 00:00:26.500 --> 00:00:31.920 It is truly amazing. We are exponentially slowing down as we approach episode 00:00:31.920 --> 00:00:34.180 number 100, The Singularity. 00:00:34.760 --> 00:00:35.380 Exactly. 00:00:35.660 --> 00:00:36.720 This is episode 96. 00:00:38.600 --> 00:00:44.420 Yes, and episode 96, like many other episodes, is sponsored by our 00:00:44.420 --> 00:00:50.260 friends from Coinkite, who produce the COLDCARD, and who are kind enough to pay 00:00:50.260 --> 00:00:54.960 for Sjors's mortgage of this beautiful penthouse where we're recording. 00:00:55.220 --> 00:00:57.640 Or just a frappuccino, probably. Somewhere in between. 00:00:59.440 --> 00:01:01.860 Sjors, we have a problem. 00:01:02.570 --> 00:01:03.290 We do. 00:01:04.790 --> 00:01:07.190 Bitcoin mining is becoming too centralized. 00:01:07.630 --> 00:01:08.830 Becoming too centralized? 00:01:10.460 --> 00:01:12.180 I think it already is too centralized. 00:01:13.340 --> 00:01:19.260 Yes. It's been trending in the wrong direction since mining was 00:01:19.260 --> 00:01:23.040 invented. Well, that's not strictly speaking true, of course, because Satoshi at 00:01:23.040 --> 00:01:24.100 first was the only miner. 00:01:24.420 --> 00:01:24.780 Exactly. 00:01:24.960 --> 00:01:26.240 So for a little while... 00:01:26.240 --> 00:01:29.580 We had a centralization phase, then we had a decentralization phase, and now we 00:01:29.580 --> 00:01:31.000 are heading towards a centralization phase. 00:01:31.000 --> 00:01:32.700 We're trending in the wrong direction again. 00:01:33.220 --> 00:01:37.500 Yep. And I think we should nuance that because I think... 00:01:37.480 --> 00:01:43.000 pools are heavily decentralized—heavily centralized. I think the physical mining 00:01:43.000 --> 00:01:47.360 equipment is actually quite well distributed over the planet and in weird remote 00:01:47.360 --> 00:01:47.860 places. 00:01:49.190 --> 00:01:52.610 But it's these pools that seem like potential choking points. 00:01:53.260 --> 00:01:57.140 Yeah, there are different layers of mining 00:01:57.140 --> 00:02:03.060 centralization, right? So there's indeed... where is the 00:02:03.060 --> 00:02:08.560 hardware located? But a lot of this is getting centralized in big data centers as 00:02:08.560 --> 00:02:12.980 well. So there's centralization pressure there. And then there is where are the 00:02:12.980 --> 00:02:18.640 mining pools operated from? Or rather, maybe how many mining pools are there? 00:02:18.980 --> 00:02:22.920 Both, I guess. Where are they operated from and how many are there? So mining 00:02:22.920 --> 00:02:27.840 pool, the pool level of centralization. And there's the chip production. 00:02:29.190 --> 00:02:34.230 centralization uh before we get so in this episode we're gonna tackle a couple of 00:02:34.230 --> 00:02:39.570 solutions that are in development of have recently launched or like some 00:02:39.570 --> 00:02:45.010 ideas to help counter this trend i'll also real quickly 00:02:45.010 --> 00:02:50.230 mention that the upcoming Bitcoin Magazine print edition that i'm the editor-in 00:02:50.230 --> 00:02:54.170 -chief of is gonna be focused on this topic as well We're going to have a whole 00:02:54.170 --> 00:02:58.310 special around mining centralization and different solutions. 00:02:58.530 --> 00:02:59.150 Sounds good. 00:02:59.770 --> 00:03:05.580 And a couple of them we're going to explore in this episode. Specifically, just 00:03:05.580 --> 00:03:11.440 to spoil that for everyone, spoil that for all our dear listeners, all 17 00:03:11.440 --> 00:03:17.300 that are still left. There's the Stratum V2. We're not really going to discuss 00:03:17.300 --> 00:03:23.200 that, I guess, because we did a whole episode on that. But Stratum V2, DATUM. the 00:03:23.200 --> 00:03:25.320 Bitaxe and P2Pool. 00:03:26.320 --> 00:03:27.660 P2Pool and its friends. 00:03:27.880 --> 00:03:32.760 Right, yeah, P2Pool and its friends. So we'll cover all of these to some extent. 00:03:32.940 --> 00:03:37.200 So different ways that mining is hopefully becoming more decentralized again. 00:03:37.680 --> 00:03:42.140 Yeah, and so some of these focus on making pools more decentralized and others on 00:03:42.140 --> 00:03:47.560 the physical equipment. Although none of them fix the making of the chips. 00:03:49.820 --> 00:03:55.560 No, but there are some interesting developments there as well, as you can read in 00:03:55.560 --> 00:03:57.380 the upcoming Bitcoin Magazine print edition. 00:03:57.780 --> 00:03:59.100 All right. This sounds like an ad. 00:03:59.740 --> 00:04:05.510 Speaking of ads, did you know that the Genesis book is now also available in 00:04:05.510 --> 00:04:06.210 Dutch, Sjors? 00:04:06.570 --> 00:04:07.510 I saw that. 00:04:07.650 --> 00:04:09.310 You can finally read the Genesis book. 00:04:09.470 --> 00:04:10.810 I think I read the English version. 00:04:11.500 --> 00:04:16.440 Yeah, it's interesting because I had it translated to Dutch. It was translated to 00:04:16.440 --> 00:04:17.640 Dutch, but not by me. 00:04:18.450 --> 00:04:23.130 But did you give any feedback on the translations to the original intent of the author? 00:04:23.990 --> 00:04:29.750 No, because I did want to do that. 00:04:31.270 --> 00:04:37.220 But it was weird to read my own text 00:04:37.220 --> 00:04:39.480 in my own language, but not written by me. 00:04:41.630 --> 00:04:47.410 This is how Alexey Pertsev feels in court because he wrote statements in Russian 00:04:47.410 --> 00:04:50.670 and then they got translated to Dutch and then the judge would read them out in 00:04:50.670 --> 00:04:54.550 Dutch and then the translator would turn it back into English and he would not 00:04:54.550 --> 00:04:56.990 have any idea what it's about even though it's his own words. 00:04:57.360 --> 00:05:03.160 Yeah, it was weird. I'm not sure how to explain it. It's like my 00:05:03.160 --> 00:05:06.840 text, but not my text or something. It's like if I had written it in Dutch 00:05:06.840 --> 00:05:11.180 originally, I would have said, you know, I've written things differently, but I 00:05:11.180 --> 00:05:15.360 would have written many things differently, actually. There's just a difference, 00:05:15.540 --> 00:05:19.700 I guess, in how I think in English and Dutch. You know, it just comes out 00:05:19.700 --> 00:05:20.140 differently. 00:05:20.940 --> 00:05:22.780 Yeah, that's what I would expect as well. 00:05:26.250 --> 00:05:30.670 It was like, well, if I'm going to start giving feedback here on how I would 00:05:30.670 --> 00:05:34.150 write it, then I'm just going to rewrite the whole thing, pretty much. 00:05:34.450 --> 00:05:37.210 Yeah, and if you do that, then the question is, would you improve things? So 00:05:37.210 --> 00:05:39.070 would you write entire new chapters into it? 00:05:40.550 --> 00:05:45.170 So I decided in the end, I'm just going to treat this like any other translated 00:05:45.170 --> 00:05:50.610 version of a book that I can't read. 00:05:51.190 --> 00:05:55.530 The translator just does it and whoever wants to read it in that language can do 00:05:55.530 --> 00:06:01.430 it. So no, I did not actually do that. I just sort of trusted the translator with 00:06:01.430 --> 00:06:02.970 it. I haven't even read the whole thing even. 00:06:03.250 --> 00:06:05.150 Are you going to do a Dutch audiobook? 00:06:07.300 --> 00:06:13.180 Well, so then I would have to, well, would I do it myself? So I did 00:06:13.180 --> 00:06:17.400 consider that. And in that case, I would probably just take the Dutch 00:06:17.400 --> 00:06:22.380 translation. But now I have to read it out loud in my own voice, my own text, 00:06:22.600 --> 00:06:25.880 which is not my own. I don't know. It gets too weird. So I think not. 00:06:26.280 --> 00:06:28.480 So you'd have an AI voice that sounds like you. 00:06:29.830 --> 00:06:32.190 Trained on this podcast when you're speaking English. 00:06:32.370 --> 00:06:32.590 Right. 00:06:33.560 --> 00:06:33.940 Anyway. 00:06:35.880 --> 00:06:39.320 Anyways, what were we talking about again? What are we doing here? 00:06:39.580 --> 00:06:41.360 Well, the problem is mining centralization. 00:06:41.600 --> 00:06:45.660 We're making a podcast. Bitcoin Explained on mining centralization and potential 00:06:45.660 --> 00:06:46.740 solutions. That's right. 00:06:48.840 --> 00:06:54.530 So the first solution, do we, again, I think the 17 listeners that are left 00:06:54.530 --> 00:06:58.250 listening to this podcast probably all know why mining centralization is a 00:06:58.250 --> 00:07:01.010 problem. But should we explain that real quick? 00:07:01.150 --> 00:07:03.610 We should. Yeah, it may be useful to spell out a few things. 00:07:05.260 --> 00:07:09.920 In principle, centralization doesn't have to be a problem because the way it 00:07:09.920 --> 00:07:14.860 works is you as a user create a Bitcoin transaction and some miner doesn't like 00:07:14.860 --> 00:07:20.500 you or they are asked by some man with a gun to not like you and they block your 00:07:20.500 --> 00:07:24.320 transaction. They don't put it in a block. But then as long as somebody puts it 00:07:24.320 --> 00:07:28.790 in a block, you'll eventually get in there. And, you know, we're not that worried 00:07:28.790 --> 00:07:32.890 about super fast confirmations anymore because we have the Lightning network. So 00:07:32.890 --> 00:07:35.930 really, you know, as long as a few percent of miners let your blocks in, you're 00:07:35.930 --> 00:07:40.140 fine. But it's still not great. That's one objection. 00:07:41.940 --> 00:07:45.800 So we'd like, you know, we wouldn't want a situation where 90 percent of miners 00:07:45.800 --> 00:07:48.860 suddenly decide to not like you. And then you kind of have to hope that 10 00:07:48.860 --> 00:07:49.280 percent. 00:07:50.220 --> 00:07:56.030 Yeah, I mean, I guess the short version of it is. We want Bitcoin to be 00:07:56.030 --> 00:08:00.330 censorship-resistant. That's kind of one of the design goals. I think that's fair 00:08:00.330 --> 00:08:06.270 to say. And for it to be censorship-resistant, it needs to be impossible to 00:08:06.270 --> 00:08:10.810 regulate mining, basically. Because what regulators tend to do is they tend to 00:08:10.810 --> 00:08:16.790 blacklist certain people or institutions or companies or countries. 00:08:19.040 --> 00:08:22.660 So if we want to stop that from happening, then basically regulators need to not 00:08:22.660 --> 00:08:28.440 be able to regulate Bitcoin and specifically in this case on the mining level. If 00:08:28.440 --> 00:08:34.240 mining centralizes too much, so if mining happens by too few 00:08:34.240 --> 00:08:39.360 people or all in the same location or something like that, then regulators have a 00:08:39.360 --> 00:08:43.800 place to go and they can start to impose the censorship on Bitcoin through these 00:08:43.800 --> 00:08:47.060 miners. If you keep it decentralized, this is much harder to do. 00:08:47.390 --> 00:08:52.770 Yeah, and another thing to consider is defense in depth. So usually you don't 00:08:52.770 --> 00:08:56.410 want to have only one line of defense. Like you could say, well, even if 90% of 00:08:56.410 --> 00:09:00.750 the miners censor me, it doesn't matter because this 10% is still left. But it's 00:09:00.750 --> 00:09:05.310 better to be safer and make sure that that 90% is not even going to censor you. 00:09:07.740 --> 00:09:12.640 So you want to defend yourself in multiple places, not just have one last thing 00:09:12.640 --> 00:09:17.190 that you think will protect you and then some surprise happens. Turns out you're 00:09:17.190 --> 00:09:17.690 not protected. 00:09:17.890 --> 00:09:17.990 Yeah. 00:09:18.570 --> 00:09:23.530 One such surprise could be the government ordering the compliant miners to reorg 00:09:23.530 --> 00:09:25.370 out the evil miners. 00:09:27.080 --> 00:09:30.360 Because then that 10%, you won't get through it. 00:09:30.720 --> 00:09:35.500 Right. So one of the ways, you know, I explained one of the levels of 00:09:35.500 --> 00:09:40.620 centralization is pool centralization, right? So a mining pool is, you know, some 00:09:40.620 --> 00:09:46.120 entity that allows other people to bundle their hash power through you. 00:09:46.220 --> 00:09:50.160 But at that point, you are also the entity that's doing the transaction 00:09:50.160 --> 00:09:51.260 selection, typically. 00:09:52.200 --> 00:09:52.320 Yeah. 00:09:52.680 --> 00:09:58.570 So you are then, you know, even if there's like, 10,000 people with ASIC machines 00:09:58.570 --> 00:10:02.470 mining all across the world, if there's only one person doing actual transaction 00:10:02.470 --> 00:10:06.250 selection, the operator of the mining pool, then again, the regulator just needs 00:10:06.250 --> 00:10:10.570 to find this one person in order to impose censorship. Today, we live in a world 00:10:10.570 --> 00:10:16.470 where two or three mining pools have more than 50% of the total 00:10:16.470 --> 00:10:17.430 hash power on Bitcoin. 00:10:18.920 --> 00:10:23.960 you know it now i'm sort of leaving out the part where hash power can move to 00:10:23.960 --> 00:10:27.420 different pools if this starts to happen but at least sort of superficially at 00:10:27.420 --> 00:10:32.260 face value that means right now you only have to contact you know a regulator 00:10:32.260 --> 00:10:34.560 only have to contact two or three mining pools and 00:10:35.080 --> 00:10:38.800 Yeah, and I guess this goes into the fact that mining pools are doing multiple 00:10:38.800 --> 00:10:43.680 things. And so even if you can't make the pool smaller, at least you can maybe 00:10:43.680 --> 00:10:46.780 make mining pools do fewer of those things. 00:10:47.160 --> 00:10:47.400 Right. 00:10:47.600 --> 00:10:52.880 So mining pools combine funds. That's a way to reduce your risk as an individual 00:10:52.880 --> 00:10:57.000 miner. So you always get the same payout instead of maybe once a year or less. 00:10:57.860 --> 00:11:02.160 But another thing a mining pool does is it decides what goes in the block. And so 00:11:02.160 --> 00:11:05.970 there are several proposals that... remove that role from the mining pool even 00:11:05.970 --> 00:11:09.670 though the pool might still be big they don't get to decide what's in a block or 00:11:09.670 --> 00:11:10.490 to some extent 00:11:10.680 --> 00:11:16.540 yes so that's first the first project that realized this was Stratum 00:11:16.540 --> 00:11:22.100 v2 right that's what you're talking about yes so indeed you have a mining pool a 00:11:22.100 --> 00:11:26.940 mining pool operator that usually selects which transactions go in a block the 00:11:26.940 --> 00:11:30.900 idea was let's decentralize that so in the same way that the hash power is 00:11:30.900 --> 00:11:35.920 decentralized there's all these ASIC machines, these thousand people having ASIC 00:11:35.920 --> 00:11:39.900 machines all across the world, as I just mentioned. The idea was let's design a 00:11:39.900 --> 00:11:44.320 mining pool so that these thousand people, they are actually deciding themselves 00:11:44.320 --> 00:11:47.480 which transactions they're including in the blocks they're mining. And then 00:11:47.480 --> 00:11:51.690 they're still sharing the reward. So that's Stratum v2. We did an episode on 00:11:51.690 --> 00:11:53.030 Stratum v2, episode 80. 00:11:53.350 --> 00:11:57.110 Yeah, it's not the only thing Stratum v2 does. It also adds encryption. It tries 00:11:57.110 --> 00:12:02.710 a lot of things. Indeed, we did an episode about it. I guess one thing we can say 00:12:02.710 --> 00:12:06.270 about it that's relevant for the next topic, I think, is that it's somewhat 00:12:06.270 --> 00:12:11.470 complicated. So Stratum v2 really tries to be the first actual spec because the 00:12:11.470 --> 00:12:15.310 first version of Stratum did not have a spec. It was just code. So there's an 00:12:15.310 --> 00:12:19.180 actual specification. There are different... components, different roles, as 00:12:19.180 --> 00:12:23.540 they're called, that communicate with each other and that also need to be 00:12:23.540 --> 00:12:27.640 implemented. And so one of the downsides is that it's, you know, it's not that 00:12:27.640 --> 00:12:32.440 easy to get started with Stratum V2. And so, you know, other people have tried 00:12:32.440 --> 00:12:33.640 other methods that are easier. 00:12:34.290 --> 00:12:40.230 Right, okay. Yeah, and currently there are two Stratum V2 projects, basically, right? 00:12:40.590 --> 00:12:45.690 Yeah, so there is a firmware implementation by Braiins on their Braiins OS, which 00:12:45.690 --> 00:12:48.170 is a custom piece of firmware that you put on your ASIC. 00:12:48.350 --> 00:12:49.490 Yeah, Braiins is a mining pool. 00:12:49.670 --> 00:12:53.310 Yeah, the only downside with that is that it's actually behind on the current 00:12:53.310 --> 00:12:58.450 spec. So they're working on it, but it could take a while. You don't need to have 00:12:58.450 --> 00:13:03.380 Stratum V2 support on the firmware itself. You can run a translator. converts the 00:13:03.380 --> 00:13:08.860 modern Stratum v2 to the old-fashioned Stratum but now you're dealing with a 00:13:08.860 --> 00:13:12.240 separate piece of software and this is where the complexity comes right back at 00:13:12.240 --> 00:13:18.120 you and there is the Stratum reference implementation SRI which is a Rust 00:13:18.120 --> 00:13:22.740 project that implements basically all of the components in Stratum v2 so you can 00:13:22.740 --> 00:13:26.240 run your own pool or you can run some software as a user 00:13:26.240 --> 00:13:32.110 yeah And SRI is actually implemented by DEMAND pool right now. So that is 00:13:32.110 --> 00:13:32.890 in use. 00:13:33.190 --> 00:13:34.310 They're using it, yes. 00:13:36.190 --> 00:13:40.450 You don't have to use it, right? You can implement Stratum V2 yourself. It's a 00:13:40.450 --> 00:13:43.670 reference, so you can use that code to see how you would want to do it. But in 00:13:43.670 --> 00:13:46.870 this case, they use the actual code, probably with some changes for themselves. 00:13:48.370 --> 00:13:48.570 Yeah. 00:13:50.550 --> 00:13:54.330 Okay, so that's Stratum V2, I think, right? So we're not really going into 00:13:54.330 --> 00:14:00.320 detail. Beyond this, I'm sure it's been a while. It's been like two 00:14:00.320 --> 00:14:04.760 years, but I'm sure there was plentiful more detail in the actual episode. 00:14:04.840 --> 00:14:05.300 Episode 80. 00:14:05.600 --> 00:14:06.460 Yeah, and also some history. 00:14:06.840 --> 00:14:07.320 Okay. 00:14:09.460 --> 00:14:15.320 I don't remember that at all, but maybe I'll relisten to it 00:14:15.320 --> 00:14:17.460 myself someday. Could be a good idea. 00:14:18.840 --> 00:14:22.180 There is a new similar-ish project as well. 00:14:22.930 --> 00:14:23.410 Yes. 00:14:23.630 --> 00:14:29.600 DATUM. So DATUM is implemented by OCEAN. OCEAN Pool. Are they just called OCEAN 00:14:29.600 --> 00:14:33.560 or OCEAN Pool? I'm actually not sure. Anyways, I think it's just OCEAN. 00:14:33.880 --> 00:14:38.720 So we have an episode explaining how OCEAN's TIDES system works. It's their way 00:14:38.720 --> 00:14:43.760 of share accounting. This would be completely separate from that in a way. 00:14:44.960 --> 00:14:50.780 They released basically a piece of software that you run and it communicates to 00:14:50.780 --> 00:14:54.530 their pool and it makes sure that you can make your own templates. How it does 00:14:54.530 --> 00:14:55.610 that? Magic. 00:14:57.240 --> 00:14:59.200 Because the specification is not out there. 00:14:59.440 --> 00:15:03.060 There's no specification yet, but my impression is it's somewhat similar to 00:15:03.060 --> 00:15:08.650 Stratum V2, but it does have some different trade-offs. But 00:15:08.650 --> 00:15:10.950 we can do an episode when there is a spec. 00:15:11.210 --> 00:15:12.570 Do you know what the trade-offs are? 00:15:14.780 --> 00:15:20.750 No, I think we can go back to Stratum V2 a little bit. So there are... Three 00:15:20.750 --> 00:15:25.530 ways in which you can do templates in Stratum v2. One is you can just use the 00:15:25.530 --> 00:15:29.370 template that the pool tells you to use. That's the old Stratum v1 model, 00:15:29.530 --> 00:15:34.790 essentially. The other is where you, and this is the model we talked about in the 00:15:34.790 --> 00:15:40.150 last episode, two years ago, where you announce to the pool, I want to make this 00:15:40.150 --> 00:15:44.750 template. So you've made your template. You have to tell the pool about it. And 00:15:44.750 --> 00:15:50.370 then the pool could reject it. And they can also see it. But there's a third way, 00:15:50.550 --> 00:15:56.450 which I think DATUM uses and Stratum v2 is sort of changing the spec to also do 00:15:56.450 --> 00:16:00.470 this. And I don't know which one came first or whatever. But the idea is that you 00:16:00.470 --> 00:16:03.790 don't actually tell the pool what you're going to mine. You just give it a bunch 00:16:03.790 --> 00:16:09.780 of Merkle hashes. I think we covered Merkle trees before. And then 00:16:09.780 --> 00:16:14.500 they know that the block, you know, they know how much fees they're being paid, 00:16:14.620 --> 00:16:17.980 but they have no idea what's in the block until you publish it to the blockchain. 00:16:18.540 --> 00:16:22.300 So you as the miner, if you find the winning block, you put it on the blockchain, 00:16:22.300 --> 00:16:25.760 and that's only when the pool learns what was actually in it. That makes 00:16:25.760 --> 00:16:30.740 censorship impossible, right? Or at least other than self-censorship. 00:16:32.780 --> 00:16:38.700 Well, also, the other thing I wanted to bring up is I do think there is 00:16:38.700 --> 00:16:42.800 a legitimate sort of critique on this approach. 00:16:44.070 --> 00:16:45.150 The third one you mean? 00:16:46.900 --> 00:16:52.640 either of them really like i just did this this concept in itself uh like i 00:16:52.640 --> 00:16:57.930 like fundamentally if 00:16:58.120 --> 00:17:04.080 regulators would go out and take the step of censoring uh you know 00:17:04.080 --> 00:17:10.000 imposing censorship through pools uh they can't do it with these kinds of pools 00:17:10.000 --> 00:17:13.220 indeed because these pools aren't doing the transaction selection 00:17:14.960 --> 00:17:19.860 However, if a regulator wants to get serious about it, they can, of course, still 00:17:19.860 --> 00:17:25.300 say, well, you have to, so you just can't do this type of mining then if you 00:17:25.300 --> 00:17:26.580 can't do it with this type of mining. 00:17:26.880 --> 00:17:30.880 Yeah, so in Stratum v2, in that sense, the design is more flexible, which you 00:17:30.880 --> 00:17:34.940 could see as a good thing or as a bad thing. One thing a pool could do if they 00:17:34.940 --> 00:17:39.770 wanted to is they can get the templates from a compliant company. So they 00:17:39.770 --> 00:17:43.610 wouldn't let the users make their own templates, but they would basically, as a 00:17:43.610 --> 00:17:47.830 pool, have another company that they get the template from. So it's not their 00:17:47.830 --> 00:17:51.270 responsibility to make the templates. Somebody else is doing it. I don't think 00:17:51.270 --> 00:17:52.910 that would help decentralization much, though. 00:17:53.390 --> 00:17:55.490 Well, it wouldn't help censorship resistance much. 00:17:56.010 --> 00:17:57.070 Yeah, exactly. 00:17:57.630 --> 00:18:03.570 Yeah. I think a more practical... By the way, I don't want to discourage 00:18:03.570 --> 00:18:06.590 this type of development. I do think it's at least thinking in the right 00:18:06.590 --> 00:18:12.270 direction, and there's probably potential in that direction. I just do 00:18:12.270 --> 00:18:17.870 think it's not as if this is now a magic bullet and it's now actually completely 00:18:17.870 --> 00:18:18.310 solved. 00:18:18.670 --> 00:18:24.030 No, and I guess a similar analogous discussion is happening more... in practice 00:18:24.030 --> 00:18:29.270 around Lightning right now. So in Europe, we have these new, you know, even 00:18:29.270 --> 00:18:34.570 stricter KYC rules that were tagged along with MiCAR and other laws. 00:18:35.690 --> 00:18:40.810 And... They basically require exchanges to do all these on-chain surveillance 00:18:40.810 --> 00:18:45.570 things. So this is basically spying on their users on the blockchain. And as soon 00:18:45.570 --> 00:18:49.850 as people use Lightning, that such spying becomes more difficult. So I would 00:18:49.850 --> 00:18:54.790 expect on a much shorter term for regulators to be annoyed by that in some way. 00:18:54.990 --> 00:18:56.730 We haven't seen any evidence of it yet. 00:18:56.910 --> 00:19:00.330 Right, and there might be the potential that they will just say, well, you can't 00:19:00.330 --> 00:19:00.990 use Lightning then. 00:19:01.340 --> 00:19:06.180 Yeah, but then the regulators have to say, no, your customers must use a privacy 00:19:06.180 --> 00:19:09.520 unfriendly way. They must jeopardize their own privacy in order for us to be able 00:19:09.520 --> 00:19:13.860 to spy on them. There could be a whole legal battle around that if people want to 00:19:13.860 --> 00:19:16.900 actually pick the battle. But it's a similar discussion as what you brought up. 00:19:17.280 --> 00:19:21.360 You can force a pool. You can tell pools you cannot allow decentralization 00:19:21.360 --> 00:19:26.380 because we cannot control it. That's definitely possible. And so then the idea 00:19:26.380 --> 00:19:30.150 would be, so the pool still has power. 00:19:31.800 --> 00:19:37.400 it still has a benefit of being big. I guess there's two things. So even though 00:19:37.400 --> 00:19:42.500 it's not doing the transaction selection, it is doing the payouts. And so as a 00:19:42.500 --> 00:19:47.700 user, you want to be able to get paid and that gives the pool some power. Even 00:19:47.700 --> 00:19:50.520 though they might not control what's in the block, they are the one who are 00:19:50.520 --> 00:19:54.660 organizing the payment and by being that person, they can, yeah, there's still a 00:19:54.660 --> 00:19:59.250 choke point in it. So I think one question that's interesting to answer is why 00:19:59.250 --> 00:20:00.290 are these pools so big? 00:20:02.670 --> 00:20:06.250 related to that. Because being big is also what makes them an attractive target 00:20:06.250 --> 00:20:11.120 in the first place. If there was just a million tiny pools... then although in 00:20:11.120 --> 00:20:14.180 theory you could enforce it on all the million of them, you can't really. 00:20:14.400 --> 00:20:17.460 You want to explain why mining is centralized? 00:20:17.920 --> 00:20:22.980 Yeah, so one of the problems is that a lot of miners want to be paid a constant 00:20:22.980 --> 00:20:23.600 amount of money. 00:20:23.700 --> 00:20:25.000 Yeah, you already explained that, Sjors. 00:20:25.220 --> 00:20:30.420 Well, not entirely. What I explained is the reason you use a pool in the first 00:20:30.420 --> 00:20:34.400 place is to get a relatively constant payout. But there's still some luck 00:20:34.400 --> 00:20:38.080 involved. A pool might find a block or a pool might not find a block. And some 00:20:38.080 --> 00:20:41.740 people want even more certainty than that. They just want to say, if I provide 00:20:41.740 --> 00:20:47.740 hash power, I want to get paid. And this game theory is tricky. But basically, it 00:20:47.740 --> 00:20:50.940 means that a pool has to take some financial risk to do this. They have to have 00:20:50.940 --> 00:20:55.050 capital. in order to pay you, even though they're not finding a block. And they 00:20:55.050 --> 00:20:57.930 might not find a block for a very long time, and they could go bankrupt over that. 00:20:58.130 --> 00:21:01.830 Right, right, right. This is a good point to bring up, actually. So rather, 00:21:02.230 --> 00:21:06.030 actually, like the explanation I gave earlier is actually not strictly correct. 00:21:06.510 --> 00:21:12.290 It's not the case that, well, no, it sort of is. But the point 00:21:12.290 --> 00:21:16.510 here is that a lot of miners are basically just selling their hash power and then 00:21:16.510 --> 00:21:19.770 getting a fixed payment for their hash power. 00:21:19.930 --> 00:21:23.770 The idea of pools started out with just the idea like, okay, if I just mine on my 00:21:23.770 --> 00:21:27.810 own, it will take me 5 million years to find a block. That's not good. But as 00:21:27.810 --> 00:21:32.330 soon as you can find a block every day or so, you should be fine. But that's not 00:21:32.330 --> 00:21:36.850 enough for some people. And so they want to be paid constantly. And now in order 00:21:36.850 --> 00:21:40.130 to do that, you need to take financial risk. And it turns out that this financial 00:21:40.130 --> 00:21:45.490 risk-taking works better at scale. So this is a massive incentive towards just 00:21:45.490 --> 00:21:50.030 there being one pool. And then they're financed by Goldman Sachs. And that's it. 00:21:52.830 --> 00:21:58.780 And the solution to that... We kind of might get back to it tangentially, 00:21:59.000 --> 00:22:02.580 but kind of really none of the four things we're mentioning really solves this problem. 00:22:05.600 --> 00:22:11.500 So the OCEAN pool, for example, does not solve this problem. They just pay you 00:22:11.500 --> 00:22:16.000 whenever they find a block. So that means that the people who can use them are 00:22:16.000 --> 00:22:20.470 people who are okay with that. Now, the benefit that they offer is transparency, 00:22:20.470 --> 00:22:25.850 which we explained in the TIDES episode. So although you might get paid 00:22:25.850 --> 00:22:29.970 unpredictably, you know exactly that the pay you got was fair, which is very 00:22:29.970 --> 00:22:33.510 difficult to do with these other schemes where it's very untransparent. So you 00:22:33.510 --> 00:22:36.970 think you're paying a 2% fee, but are you really paying a 2% fee? You have no idea. 00:22:37.130 --> 00:22:39.510 Yes, exactly, yeah. Yes. 00:22:41.750 --> 00:22:47.450 And in order to fix this, basically... This constant flow of money problem that 00:22:47.450 --> 00:22:50.110 would require really fancy derivatives, products, 00:22:51.430 --> 00:22:54.970 you know, Discreet Log Contracts. There's all sorts of fancy ideas around it, but 00:22:54.970 --> 00:22:57.750 it gets pretty abstract very quickly. 00:22:58.760 --> 00:23:03.760 Okay, let's move to the next topic. This one is interesting and probably a little shorter. 00:23:03.960 --> 00:23:07.160 I just wanted to say one more thing about DATUM. So because it's so simple, it's 00:23:07.160 --> 00:23:11.700 like just install one piece of software. There's already an Umbrel app for it. So 00:23:11.700 --> 00:23:15.240 it's just very easy, especially for hobby miners, to just try it out and play 00:23:15.240 --> 00:23:19.060 with it. I'd like for Stratum v2 to be able to do that as well. I think it's 00:23:19.060 --> 00:23:23.450 technically very possible. It's just a matter of having enough people doing these things. 00:23:24.770 --> 00:23:25.190 Anyway. 00:23:26.030 --> 00:23:30.560 Okay, so the next topic is an interesting one. The Bitaxe. 00:23:30.640 --> 00:23:31.480 The Bitaxe. 00:23:31.700 --> 00:23:33.480 What is the Bitaxe, Sjors? 00:23:33.860 --> 00:23:34.700 It's an axe. 00:23:35.630 --> 00:23:36.250 Is it though? 00:23:36.650 --> 00:23:41.250 No, it's not. It's basically what they did. Well, what it looks like is a very 00:23:41.250 --> 00:23:45.970 small device, about the size of, well, half the size of a teacup, or a quarter of 00:23:45.970 --> 00:23:47.590 the size of a teacup, if you have a big teacup. 00:23:49.520 --> 00:23:51.480 It basically... 00:23:51.480 --> 00:23:55.240 Since when are we measuring mining hardware in teacups? 00:23:55.300 --> 00:23:59.920 Well, we have Americans listening, and they use all these weird non-metric units, 00:24:00.080 --> 00:24:01.520 so we should indulge them a bit. 00:24:01.520 --> 00:24:02.040 We'll adopt our own. 00:24:02.160 --> 00:24:03.020 Quarter teacup. 00:24:06.500 --> 00:24:11.080 Sorry. Anyway, it's a very small device that's kind of a fun way to hobby mine. 00:24:11.220 --> 00:24:15.260 So it's not a way to make a lot of money, but it doesn't use a lot of power 00:24:15.260 --> 00:24:18.900 either. It might use 15 watts or something, so it's like a couple of LED lights. 00:24:19.080 --> 00:24:21.700 It's the kind of thing that you can have in your living room and brag about it. 00:24:22.370 --> 00:24:27.220 However, inside of it is a single ASIC chip. 00:24:28.360 --> 00:24:32.920 Where does that ASIC chip come from? It comes from a bigger miner. So what 00:24:32.920 --> 00:24:36.860 basically happens, if you take a... A big miner, those have hundreds. 00:24:37.080 --> 00:24:37.860 How many teacups? 00:24:38.140 --> 00:24:40.720 They are the size of two shoeboxes. 00:24:41.620 --> 00:24:43.040 It's getting very complicated now. 00:24:43.080 --> 00:24:47.420 Originally, the S9 was one shoebox, and then the newer miners are two shoeboxes. 00:24:47.580 --> 00:24:49.680 How many teacups in a shoebox? 00:24:49.800 --> 00:24:55.460 I don't know. Anyway, so what happens is somebody takes those big miners and... 00:24:55.290 --> 00:25:00.310 carefully takes out the individual chips. Or they can order the individual chips 00:25:00.310 --> 00:25:05.490 on Alibaba, those kind of sites, depending on the supply chain. 00:25:06.470 --> 00:25:10.610 And then you take one of those chips and you put them on a minicomputer. They're 00:25:10.610 --> 00:25:16.370 very simple ESP32 minicomputers. And then there's an open-source operating system 00:25:16.370 --> 00:25:20.560 that is able to control the individual mining chip. And so you end up with, 00:25:20.660 --> 00:25:26.320 perhaps, with the modern ones, I think it's about one terahash. compared to maybe 00:25:26.320 --> 00:25:31.980 200 terahash in a proper miner machine. So 200 of Bitaxes is the equivalent of 00:25:31.980 --> 00:25:37.020 one double shoebox professional miner. And imagine there's hundreds of thousands 00:25:37.020 --> 00:25:41.580 of normal mining machines in a big data center, and you get a sense of the scale 00:25:41.580 --> 00:25:42.900 of this mining. 00:25:43.160 --> 00:25:43.540 Right. 00:25:45.200 --> 00:25:50.290 I guess the advantage would be, well, I mean... 00:25:50.780 --> 00:25:56.540 having an actual ASIC miner hardware thing that's gonna be loud 00:25:56.540 --> 00:26:00.860 and produces heat and all that kind of stuff right like that's not really something 00:26:00.860 --> 00:26:05.020 yeah this thing is very quiet it does need a fan but it's a very small one 00:26:05.610 --> 00:26:11.390 Right, so like you said, is it just for people that actually want to make 00:26:11.390 --> 00:26:13.270 money or is it more like for fun? 00:26:13.490 --> 00:26:16.550 No, because for one thing, you're probably going to run this thing at home and at 00:26:16.550 --> 00:26:20.490 home your electricity prices are going to be too high, even with a professional 00:26:20.490 --> 00:26:21.210 mining machine. 00:26:24.780 --> 00:26:29.800 But it is, I think, a way for people to become familiar with mining at all 00:26:29.800 --> 00:26:33.180 because mining is so far away now from the end user because it's such an 00:26:33.180 --> 00:26:38.090 industrial project. It's a very nice entry-level device. You can actually connect 00:26:38.090 --> 00:26:42.930 it to a pool and basically see all the moving parts. There's some open-source 00:26:42.930 --> 00:26:46.730 software involved that you can start playing with. So hopefully it's a way to get 00:26:46.730 --> 00:26:50.510 more people interested in mining. You could also see it as a lottery system. 00:26:51.070 --> 00:26:55.170 because your chances of winning are absolutely tiny. But generally, people will 00:26:55.170 --> 00:27:00.090 use this in a solo mode where if the device finds a block, which might happen 00:27:00.090 --> 00:27:04.470 once every million years. But that's every million. 00:27:04.650 --> 00:27:05.170 It's like a lottery. 00:27:06.080 --> 00:27:10.540 Yeah, it's like one in a million every year per person, right? So somebody will find it. 00:27:10.680 --> 00:27:11.960 Exactly. It's like a lottery. 00:27:12.120 --> 00:27:18.020 Yeah, it's like a lottery. And then you get the full whatever 3.25 BTC, which 00:27:18.020 --> 00:27:18.460 is nice. 00:27:19.160 --> 00:27:19.440