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Bitcoin Industry Colluded, Says Miner

Last Updated March 4, 2021 4:54 PM
Andrew Quentson
Last Updated March 4, 2021 4:54 PM

After almost two years of debate and seemingly nothing left to be said on the topic of bitcoin scalability, miners continue to not make a concrete decision with transaction backlogs now becoming common.

BW.com, a mining pool with around 7% of the network’s hashrate, signals for 8MB blocks, but has never mined with any client which increases maxblocksize. Bitmain’s co-founder, Micree Zhan, stated in a recent interview that he prefers Bitcoin Unlimited. Jihan Wu, the other co-founder of Bitmain, has vocally asked for a maxblocksize increase. Yet, despite the pool controlling around 18% of the network’s hashrate, they do not mine with Bitcoin Unlimited and have never mined with any client which increases maxblocksize.

This behavior appears puzzling, but, there was collusion, CCN.com was told back in November by a miner who would rather not be named:

“I saw industry colluding to push their agendas and I wanted no part in it.”

He is one of many miners that have now entered the scene “not primarily driven by profit seeking but to disrupt, or at least, irritate, the incumbents a little bit and free myself the burden of moral conflict.”

No details were provided, nor any concrete evidence, but suspicions that there was collusion has continued to increase due to the maneuvers over the Hong Kong Agreement .

Just under exactly one year ago, almost all miners and many Bitcoin Core developers held a closed-door meeting where no journalists or independent observers were invited.

Little, if anything, is known about what exactly happened during those 17 hours, except for a published signed agreement which binds miners to only run Bitcoin Core compatible clients for the foreseeable future.

Indications that this was more than just a paper promise came within hours of the agreement’s publication due to a spat between miners and Adam Back, Blockstream’s President. The English version showed him as signing under his individual capacity, but the Chinese version showed him signing as Blockstream’s President. This discrepancy led to miners publicly asking him to changes the English version to Blockstream President, which he did.

Suspicions that this wasn’t just a mere paper agreement grew further when Bitcoin Core pull requested an unfinished segwit to argue that, technically, they had kept the agreement. Luke-Jr further claimed he technically delivered on the maxblocksize increase promise by suggesting a decrease of the blocksize to 300KB, followed by a 17% yearly increase, delivering 2MB in around two decades.

The nature of these arguments, which are based on legalese technicalities, indicates the agreement was contractual and binding, but there has been no concrete evidence except for the miner’s statement that he saw industry collusion.

Bitcoin Core developers and miners have kept blaming each other for breaching the agreement, but all miners who signed it continue to mine with the Bitcoin Core client.

1MB Forever?

There are two proposals on the table to increase transaction capacity, Segregated Witnesses – a proposal by Bitcoin Core – and Bitcoin Unlimited – a new grassroots client. They both currently stand at around 20-25%. Bitmain, F2Pool, BW.com and HaoBTC, all signers of the agreement, are not choosing either, maintaining capacity at a very limited 1MB.

It is not clear why they are making no decision. Suggestions have included that they are waiting for the right time, that they are waiting for Bitcoin Core to make a new, more acceptable, proposal, that they may be enjoying the high fees, that they find any move to be highly risky and that perhaps they are bound to run only Bitcoin Core compatible clients.

Segwit and Bitcoin Unlimited Current Hashrate Share – image from nodecounter

Since the agreement was signed, mining has become more decentralized. In February 2016, F2Pool and Bitmain had, in combination, just above 50% of the network hash-share with Bitfury, BTCC and BW.com accounting for almost all of the rest. Now, new pools have entered the scene with ViaBTC and BTC.TOP being the most prominent. They have not signed the agreement and are both vocally in favor of Bitcoin Unlimited, mining with the new grassroots client.

However, without a decision by F2Pool or Bitmain, both signatory to the agreement, it is unlikely the situation will change anytime soon. Wang Chun, co-founder of F2Pool, told CCN.com earlier this month that they have no plan to upgrade to segwit or to mine with Bitcoin Unlimited. Jihan Wu, co-founder of Bitmain, told CCN.com on the 5th of February 2017 that:

“The protocol debate is not my priority. I need to focus on BITMAIN’s own business these days.”

Bitcoin’s Current Hashrate Distribution

If there was indeed collusion, then Bitcoin is facing its ultimate test. Mining is an open and permissionless zero-sum game as any gain in hashrate is at the expense of other miners. As such, concentration of hashrate, in theory, is not a great problem because any abuse would likely lead to miners being replaced with newer honest miners who wish to protect their investment.

Whether that theory translates into practice remains to be seen, but what appears clear, for now, is that any solution is unlikely for 2017, with transaction backlogs probably continuing as bitcoin begins to transform into a slow, unpredictable and expensive payment network.

Image from Shutterstock.