Praxeological Analysis of PoW Policy Changes, Re: ASICBOOST
On the $100M profit claim
First I'd like to confirm Gregory Maxwell's assertion that covert use of
ASICBOOST could result in $100 million USD per year profits.
profit = reward - costs.
Total reward is fixed at (12.5 block reward + 3 fees) * 6 per hour * 24 per day
* 365.25 days per year * $1150 USD per bitcoin ~= 1,000,000,000 or 1Billion USD
Miners normally compete against each other until there is only a very small,
practically zero profit. Lets say that 50% of the mining hashpower are
operating at profit = 0, and the other 50% are operating with > 0 profit due to
the 20% increased efficiency of the covert optimization.
How much profit is earned by the covert optimization operators?
Half of the operators would have a cost of ~$500,000,000.
Half would have a cost of ~0.8 * ~$500,000,000 = $400,000,000, leaving profit =
But does this make sense? What if 95% of hashing power miners used the more
efficient process, and 5% didn't. Would this still result in using a similar
formula, with $950M * 0.2 = $190M profits? I believe it would. Essentially, the
the 95% of the miners are colluding to not increase their capital & hashing
power enough to erase their profits. Hence an entity or multiple entities may
be colluding to decrease the security of ordering (double spend prevention) of
Hence a claim that as much as $100M per year could be gained by using the
ASICBOOST Optimization is a valid claim.
Miners and Money Owners have Different Motivations
Money owners and miners have different motivations. Miners are currently
concerned about the 1-2 year ROI of their capital. In the long term, as ASIC
technology for Bitcoin matures, miners will have a longer term ROI concern. For
money owners: Short term money owners are looking to transfer their money in
the most efficient manner. Long term money owners are looking for a money they
expect will become more valuable in the future due to its ability to handle
more users with a higher money transfer efficiency than other competing
$100M per year is a pretty good reason for a miner to want to delay Bitcoin
policy improvements that primarily benefit the money owner, yet have only
marginal utilitarian benefits for the miner, but evaporate their ability to
have such an income.
Money Owner Perspective Analysis
Money owners strive to have a have a PoW algorithm that does not give a subset
of the world an advantage by government interference. Such interference
threatens bitcoin's decentralized nature, and hence the users' ability to have
a money who's policies are dictated by themselves rather than a centralized
Changing the PoW algorithm in a way that makes existing ASIC miner capital
worthless... is undesirable because it creates new opportunities for first to
market optimizations to centralize mining. It also makes bitcoin's security
weaker because the uncertainty of the PoW algorithm de-incentivizes the effort
to invest in mining capital, which creates a larger threat for a future
malicious threat to perform the 51% attack. For the duration that a new PoW
algorithm is not fully optimized with the current latest ASIC manufacturing
techniques, and there remains undiscovered optimizations, the double spend
security is weaker.
Gregory Maxwell's proposal does not make existing mining capital worthless...
it only removes the advantage of using the patent encumbered optimization.
Existing capital, particularly the S9, remains being the most efficient capital
available for mining Bitcoin. Activating such a proposal will set a precedent
for mining equipment manufacturers and operators to expect that certain classes
of patented optimizations will only have a limited ROI timeframe before they
are made unavailable due to users changing the PoW policy. Miners may still
pursue optimizations that are not encumbered by patents without concern that
their optimization advantage will be disabled just for the purpose of
benefiting some other arbitrary set of miners.
Given that a money owner would not want Bitcoin's ability to transfer money
efficently be encumbered in the long term for the sake of miner's profits... in
the case where even a non-patent encumbered optimization conflicts with an
upgrade to Bitcoin for the money owners... then its a question of how much the
change increases bitcoin's money transfer efficiency, and how generous the
money owners are towards allowing the optimization-capital-invested miner. I
use the word "generous" because the policy users choose for the money supply is
entirely voluntary. No contract was made to continue using the same exact PoW