BTC Guild won't be shutting down. Not too long after the NYDFS had published it Bitlicense proposal guidelines, Michael, the owner of BTC Guild, had stated that he would shut the pool down if the regulations went into effect as proposed. On 10/31/14, he announced that he…
One of the main drivers of this proposed closure was the myriad of different state proposals for regulating Bitcoin and Cryptocurrencies. Also the risk of being hacked has been increasing while the ability to recover from it has greatly been reduced. Pool centralization causes the failure of one pool to be more disastrous than it otherwise would be. Pool centralization has left only a couple large pools causing more variance in the pool payouts for those who are much smaller.
1) Risk/cost of a successful attack against the pool. As pooled mining in general is shrinking due to large manufacturers creating private farms, the potential revenue for the pool has gone down as expected. While the pool is still very profitable, the amount of time it would take to recover from an attack has increased due to the overall share of the network shrinking.
BTC Guild has, to date, never been successfully hacked. However, I have seen a rise in attack attempts, and things like Heartbleed/Shellshock which show that efforts are being put into compromising common Linux services if possible. Neither of those attacks had any affect on BTC Guild, but they were both reminders that under BTC Guild’s own code, there are many services which could be a doorway into the pool’s servers if a vulnerability was discovered.
One successful attack could cost close to a year of pool revenue, maybe more depending on what happens in the mining landscape over that period of time. If something else happened in that time (subsequent attack or regulation forcing closure), it would mean continuing to operate the pool beyond this point has cost me more money than it might potentially make in the rest of its lifetime.
2) US government/regulators are already taking stances against specific business types in Bitcoin, applying requirements which would be impossible for BTC Guild to operate under if they attempt to extend regulation into pooled mining, either directly or indirectly due to unclear definitions. Nobody will mine on a pool which requires them to provide personally identifiable information when they can change a single line in their configuration to point elsewhere.
Additionally, state regulators are starting to make noise about Bitcoin. New York is the first to publicly put anything forward, but there are 49 other states which can put their own spin on things. Due to the ability for states to establish a nexus for businesses dealing with their state’s residents, it is a scary landscape to continue operating in.
I have no intention of leaving the US myself, and given the recent history of the US when it comes to online businesses, I wouldn’t feel safe simply moving the business legal entity to another country while continuing to live in the US myself.
As usual, Michael concisely outlines his stance and reasons for his announcement. Much like when he thought out his shutdown plan if the BitLicense went through as proposed. What happened next though was unexpected.
Many different individual companies and people have stepped up, offering to purchase the Bitcoin mining pool. One company head commented on the ongoing sale to CCN on the condition of anonymity due to negotiations:
It would not be in the best interest of Bitcoin mining for BTC Guild to close. Mining is getting too centralized and being taken away from the miners who support it.
Michael is not without standards for the sale of the pool though. He said:
I’m glad that there has been a lot of interest shown in acquiring BTC Guild, I am just hoping that it ends up in reliable hands and can continue to run under the same standards (or better) than I put myself up to over the years.
BTC Guild was created in May of 2011 and has been at the forefront of the mining community ever since its inception. BTC Guild was also the first pool to put into place a 51% mitigation plan back in April of 2013. The plan was done to prevent centralization of mining. Unlike ghash who stated they would work to try and prevent going over 51% and did nothing, BTC Guild used their policy to make sure it would not happen. Many miners have vastly overlooked the problem of pool centralization by mining at ghash and Discus Fish. Centralization of a decentralized network is an issue we as miners should all be aware. The fewer pools there are, the more centralization will occur. Miners should be aware and be careful to spread the hash rate around to avoid this. If the risk of a hack is enough to cause a pool like BTC Guild to close or be sold, can you image the consequences of a hack to a larger pool? The disruption and loss of faith in Bitcoin could be catastrophic.
BTC Guild will most likely continue with a new owner which is a good thing. More miners need to leave Discus Fish and ghash and spread their hash rate to other pools like BTC Guild, Eligius and others to protect the network and confidence in Bitcoin as a whole. Michael foresees the final negotiations for the sale of the pool being set by early next week. He is also open to having a hand in the operations, something he stated when a fellow miner expressed regret over losing him:
Eventually, yes. Part of negotiations (regardless of who ends up buying the pool) will almost certainly revolve around how much time I remain involved with the pool. Depending on the final terms, it is possible you continue to see me around for years to come in some capacity.
It is good to see the closure of BTC Guild averted, but it should not have come to this. The crazy patchwork of regulations going up not just in the US but also in other countries as well compounds on the growing mining centralization to create real problems. Bitcoin needs us all to be vigilant in doing our part to protect its longevity. Do we really want Bitcoin mining to become so centralized that a crooked company could take control? Miners are the backbone of the Bitcoin blockhain along with full nodes. We need to protect it not let it drift away.
Bitcoin also needs its miners, proponents and community to not be so passive about regulations no matter where you live. If these regulations can drive a high profile Bitcoin company out of business or to be sold imagine how many other companies never get started or choked off before they can grow. That is chilling.
CCN will bring the results of the BTC Guild sale once it happens.
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Last modified: January 3, 2020 3:24 PM UTC