|Bitcoin pools 9/1/18|
Gradually, the economies of scale you need to make money mining Bitcoin are concentrating mining power in fewer and fewer hands. I believe this centralizing tendency is a fundamental problem for all incentive-compatible P2P networks. ... After all, the decentralized, distributed nature of Bitcoin was supposed to be its most attractive feature.That October I expanded the comment into Economies of Scale in Peer-to-Peer Networks, in which I wrote:
The simplistic version of the problem is this:
- The income to a participant in a P2P network of this kind should be linear in their contribution of resources to the network.
- The costs a participant incurs by contributing resources to the network will be less than linear in their resource contribution, because of the economies of scale.
- Thus the proportional profit margin a participant obtains will increase with increasing resource contribution.
- Thus the effects described in Brian Arthur's Increasing Returns and Path Dependence in the Economy will apply, and the network will be dominated by a few, perhaps just one, large participant.
|Ethereum miners 11/07/21|
Now, a DARPA-sponsored report entitled Are Blockchains Decentralized? by a large team from the Trail of Bits security company conforms to Betteridge's Law. They examine this and many other centralizing forces affecting a wide range of blockchain implementations and conclude that the answer to their question is "No". Below the fold I comment on each of their findings (in italic), then discuss Professor Angela Walch's analysis of the problems of using "decentralized" in a legal context.