The Bitcoin WAR: Proof of Work has failed us!

Who would have thought that the very same system that was built to create Bitcoin as a decentralized and independent platform would become so perverse and corrupt that it would end up doing the complete opposite.

A Blockchain, is an open database maintained by a network of independent participants who get paid in cryptocurrency for their work. It is meant to be trusted, permanent, and public such that everyone can inspect it, but which no single user can control it.

The system that Bitcoin uses to record and validate pieces of data into the Blockchain is called proof of work, a process which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements.

At the beginning (back in 2008), the idea was that every bitcoin user could produce blocks using their own personal computer, in this way everyone had equal participation. However, as Bitcoin gained market value, better and more efficient machines (ASICS) were created to produce blocks or how is also called “mine” blocks.

ASICS are very powerful computers which are mostly produced in Asia, where companies find cheap labour. They also consume a lot of energy, these two factors combined made China the best suited place to build “Mining Farms”, they have the manufacturers and the cheap electricity to run them.

A new generation of “Chinese Miners” came along and with them came the debacle of proof of work. Don’t get me wrong, is not that the Miners are bad per se, it is just that their interests come in direct collusion with Bitcoin´s decentralized principle. They control the network and they decide on software updates, it is no longer 1 CPU – 1 Vote.

So what happens when there is a software update that benefits the whole user base, but it affects the income of large miners?, well its simple: War Happens.

The Litecoin War!

Litecoin is a coin created by Charlie Lee that is very similar to Bitcoin, it also uses Proof of Work and it is also dominated by ASICs fabricated in China. Unlike Bitcoin, Litecoin´s community is pretty united in regards of upgrading their software into a more efficient protocol called: Segregated Witness.

This upgrade of the Litecoin Protocol is not as important for Litecoin as it is for Bitcoin, since their chain is far from being full, but what should have been an easy and ordinary soft fork has become a full on War between Miners and Users.

And when I say miners I also mean Mining Pool owners, these are the guys who control large amounts of hashpower and need to update their pool´s software so that people who mine on those pools can support(vote) on the change of protocol. But seriously, what can you really expect from someone who tweets stuff like:

What the Litecoin War is showing us is that this little guy from China, Jihan Wu, has more power than we all thought and he is decided to make a political statement out of Litecoin. He will not allow SEGWIT on Bitcoin and he will sure block it too on Litecoin just to show the whole crypto community how centralized the system has become.

But how can Jihan have so much power? well he controls the biggest ASIC manufacturer in the world – Bitmain and one of the biggest bitcoin/litecoin mining pools ANT POOL. He is definitely a force to be reckon with and he does not want to negotiate.

Is a solution possible?

I don’t foresee Chinese miners giving up any time soon, they are simply playing the system Satoshi created to their advantage, we cannot expect them to have a sudden moral epiphany and change their attitude, they are business men and they will defend their profits with their teeth if necessary.

The best choice for disappointed users is to move to better distributed coins, with a more efficient governance system, like Steem, Dash, Decreed, etc.

Non the less, I believe the failure of Bitcoin´s Proof of Work will affect the credibility of the whole crypto sphere and it will take years for another crypto-currency to even become close to the adoption Bitcoin has gained.

Also published on my Medium page

Sources:

• What is Blockchain
• Bitcoin Wiki
• Is Jihan using unshipped equipment to block segwit