The future of bitcoin is determined by the people who use it, and especially by the people who mine it. Each hash calculated on a block is a vote for how the bitcoin network should operate. Up until now, we've effectively had a one-party system. It's a distributed democratic system that has heretofore been left unused. That has changed. We the miners now have the power to determine the future of Bitcoin.
If you are currently using one of our p2pool nodes or are considering doing so in the future, you have a decision to make. If not, feel free to disregard this message. If you use p2pool but don't care much, you can disregard this email as well, and we'll make the decision for you.
As some of you are aware, a version of Bitcoin XT with code to allow for a hard fork to increase the maximum bitcoin block size was released less than a day ago. You can read a description of Bitcoin XT and some of its motivations, Mike Hearn's Manifesto for the release, and Gavin Andresen's exhaustive list and rebuttal of counterarguments for bigger block sizes for more information on this debate. For news supporting the use of Bitcoin XT, you can check out http://reddit.com/r/bitcoinxt and http://voat.co/v/bitcoin. For news that censors anything promoting the use of Bitcoin XT and moderated to favor the status quo, you can check out http://reddit.com/r/Bitcoin.
Mining with Bitcoin XT will have no major differences from mining with Bitcoin Core unless 75% of the last 1000 blocks mined are mined with XT or a derivative. If this threshold is ever reached, then a waiting period of two weeks will start, after which XT nodes will start to accept (and possibly create) blocks up to 8 MB in size. The creation of a > 1 MB block will create a hard fork. There is no way to increase the block limit without a hard fork, and demand for bitcoin transactions will soon exceed what can be supplied with 1 MB blocks. Some people think that creating a hard fork like this could kill Bitcoin. I think this will save it.
Toomim Bros operates two p2pool nodes. We have switched one of those nodes to use Bitcoin XT, and we will leave the other one on Bitcoin Core. That way, our customers can choose whichever node they want in order to make their own vote for how Bitcoin should be run. Everyone is welcome to use these nodes, though you won't have great mining efficiency unless you're inside our datacenter.
So far, Bitcoin Core (and consequently all Bitcoin protocol) development has progressed on a consensus model. All of the main developers have to agree to a change in order for it to take effect. For any important change, there will always be some people who are unhappy about it, so consensus only works for making important changes in oligarchies, and even in oligarchies, it doesn't work well. We at Toomim Bros think that decisions about how Bitcoin should operate ought to be democratized. As such, we support the existence of Bitcoin XT and think that all miners should have the option to choose which version they wish to support and use.
Toomim Bros also thinks that 1 MB is way too small, and that the network can and should support larger blocks. We think that one goal for Bitcoin should be minimizing the real cost per transaction. Currently, that cost is supported primarily by the block subsidy, and runs at about 65 kWh per transaction. (300 MW mining network, 1.27 transactions per second.) That's about $4 per transaction. Increasing the transaction volume would not directly require any significant increase in the mining network power consumption, so it would reduce the real cost per transaction. Our facility spends about 80x as much on electricity as it does on internet connectivity. We do not think large blocks will present a large burden on small bitcoin miners like us.
As such, we are putting the miners owned by Toomim Bros (the company) and the Toomim brothers (the individuals) on the XT node.
We're running XT on 74.82.233.205:9334 (global IP) or 10.0.1.2:9332 (LAN IP), and Core on 74.82.233.205:9332 (global IP) or 10.0.0.1:9332 (LAN IP).
(We also will probably be changing our IP address for these nodes soon. I'll publish details about the new IP once we're ready to make those changes.)
Jonathan Toomim
Grand Poobah
Toomim Bros Bitcoin Mining Concern
We are a medium-sized (750 kW, soon to be 2.25 MW) bitcoin miner hosting company located in central Washington. Visit http://toom.im for more information on us.
I'm interested to see how our customers vote. Most of our customers don't use p2pool right now. It would make me happy if some of them decided to switch to p2pool in order to be able to vote for XT.
view the rest of the comments →
[–] gressen ago
Thanks for doing this. Also, remember that the effective transaction cost is $4 only when you take base value of 1 BTC = $0. That's a bit of a stretch as it assumes no store of value.
[–] jtoomim [S] 0 points 2 points 2 points (+2|-0) ago (edited ago)
I was calculating the $4 as 65 kWh • ($0.06/kWh). It sounds like you're asserting that most of that 65 kWh is actually proof of burn to give the block reward real value. To some extent, that's accurate. Of the 300 MW currently mining bitcoin, only about 1 to 3 MW are actually supported by transaction fees.
In the long run, though, there is a good reason why the 300 MW and $4 numbers are more relevant. If bitcoin mining revenue (in fiat or real terms) were to precipitously drop, then a lot of hashrate would be turned off. This would make the amount of hashrate needed for a 51% attack much lower while simultaneously making the amount of cheap mining hardware available for sale or rental much greater. This makes it important that the network hashrate never fall by more than about 50%, and preferably not by more than 25%.
The network hashrate is about 390 PH/s right now. That sets a safe floor for all future hashrates at around 300 PH/s. Improved ASIC efficiency might bring the power needed for 300 PH/s from about 230 MW currently (my estimate) down to 100 MW. More likely, IMHO, the mining network will continue to expand for a few more years, and 300 MW will be typical.
The power that goes into mining for bitcoin block rewards serves the dual purposes of new coin assignment and transaction verification. Each hash does both tasks. The hashrate needed to secure the network is a function of the previous hashrate, regardless of whether the previous hashrate was motivated by subsidies or by fees. In my opinion, this is a flaw in bitcoin and in most altcoins. I think cryptocurrencies should use a different algorithm (e.g. different hash function) for assigning new coins versus verifying transactions. The algo/function used for transaction verification should be designed for a high capital to operating cost ratio when performed in hardware, in order to disincentivize idling hardware when power costs rise. One possible method for this is to make the hash function for each block be selected round robin from a set of 100 different algorithms. That way, for each block, 99% of each ASIC would sit idle.