{"id":1196,"date":"2020-01-30T23:20:49","date_gmt":"2020-01-30T15:20:49","guid":{"rendered":"https:\/\/www.btse.com\/blog\/?p=1196"},"modified":"2023-03-08T04:19:02","modified_gmt":"2023-03-08T04:19:02","slug":"a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized","status":"publish","type":"post","link":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/","title":{"rendered":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)"},"content":{"rendered":"
\n

Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper<\/a> from 2009 has developed to become an activity for specialized hardware (ASICs) where thousands of actors join their forces together in mining pools in order to compete for the mining rewards.<\/p>\n

Satoshi himself never predicted the rise of ASICs (Application-Specific Integrated Circuit) and the industrialization of Bitcoin mining, and the phenomena that happened over the years are consequences of a burgeoning free market where innovation seeks efficiency.<\/p>\n<\/div>\n

Instead of having every person who runs the Bitcoin client participate in the mining process, dedicated computers have been created in order to get the job done with better results. Thanks to this dynamic, the network security of Bitcoin has increased exponentially, at the cost of reducing mining decentralization by making it harder for home computers to solve increasingly difficult mathematical problems.<\/p>\n

Interestingly, for the sake of reducing costs and maximizing efficiency, Bitcoin miners have sought and found the most affordable and green ways of producing electric energy. From the water wheels of the Sichuan region of China<\/a> to the gas wells from Alberta, Canada<\/a>, Bitcoin has spearheaded innovation and adoption of sustainable ways of producing electricity.<\/p>\n

 <\/p>\n

From CPUs to GPUs to Mining Pools and ASICs<\/strong><\/h2>\n

Bitcoin hasn\u2019t really been mined with CPUs since the days when Laszlo Hanyecz (best known for purchasing two pizzas for 10000 BTC<\/a> in 2010) found a way to get the job done more efficiently with video cards. By November 2010, Satoshi Nakamoto himself became aware of the transition towards ASICs and \u201ccooperative mining\u201d, and he took his time to write a few suggestions to improve Slush Pool<\/a> (the first mining pool in Bitcoin history).<\/p>\n

Therefore, the \u201cone CPU one vote\u201d system was short-lived and didn\u2019t work as planned. And since the early years, home mining didn\u2019t really stand a chance against larger pools that put their hashing power together in order to increase their chances of solving math problems and getting the BTC. This had two major consequences: mining clients have been separated from full node clients in order to preserve the enforcement of consensus rules, and network protection has increased exponentially at the expense of creating more miner centralization.<\/p>\n

The biggest risk of having too much concentration of hash power in the hands of a monopolistic pool or friendly oligopolistic miners is that they can launch a 51% attack on the network in order to double-spend existing transactions. This never happened thanks to three essential reasons:<\/p>\n

    \n
  1. The open and permissionless nature of Proof of Work mining allows anyone to participate in block discovery;<\/li>\n
  2. The Nakamoto consensus, which adjusts the difficulty and therefore creates opportunities for new miners to join in at various moments when other miners no longer run profitable operations;<\/li>\n
  3. The increasing interest in Bitcoin and the subsequent effects on adoption and participation.<\/li>\n<\/ol>\n
    <\/div>\n

    Even giants like Bitmain, which seemed so menacing in 2017 and 2018 that some speculated it was mighty enough<\/a> to launch a 51% attack on BTC, have lost their status after certain management decisions and a lack of innovation in the ASIC sector. Eventually, the Chinese giant that once had the same revenues as Nvidia had to scale down operations and leave room for even more decentralization.<\/p>\n

    At their peak, Antpool and BTC.com (both of which are controlled by Bitmain) had a combined hash rate of 42%, causing a lot of concern. Today, no pool owns more than 18.5% of the hash rate \u2013 and both of Bitmain\u2019s operations only amount to 23.9%. This is a testament to Bitcoin\u2019s incentives system and ongoing decentralization.<\/p>\n

     <\/p>\n

    Why Mining Pools Are not Homogenous Companies with a Universal Vision<\/strong><\/h2>\n

    When Bitcoin skeptics and critics analyze data about mining pools and hash rate distribution, they assume that a degree of centralization exists and something terrible can happen if several actors join forces to act in bad faith. This assumption isn\u2019t just relying on the \u201cSome people just want to watch the world burn\u201d scenario where no participant is driven by the best economic choice but is also factually wrong.<\/p>\n

    Mining pools aren\u2019t centralized companies that exert a general will or purpose. They are more akin to opt-in organizations that individual miners join in order to maximize their chances of discovering new blocks. SlushPool, the oldest mining pool, doesn\u2019t own all the operations taking place under its umbrella \u2013 and neither does any other entity involved in Bitcoin mining.<\/p>\n

    Miners join a pool because it provides convenience and it brings the best financial results. However, adherence isn\u2019t permanent and individual hardware owners can simply switch to another pool whenever their expectations are no longer met. Someone who contributes with hash power to F2Pool today might join BitFury in a few months because the fees are lower and more convenient \u2013 and this is just one of the examples.<\/p>\n

    If the creators of a particular mining pool have monopolistic intentions, it doesn\u2019t mean that all the participants in their pool agree with them and will stick around for 51% of attacks that damage their predictable revenue. The market is very dynamic and there is always another pool that may offer better fees, more convenience, better profitability, and even more ideological convergence.<\/p>\n

    Furthermore, with proposals like Matt Corallo\u2019s BetterHash<\/a> which is being deployed by Blockstream in its hosted mining operations, pool mining will only become more decentralized through further individual miner empowerment.<\/p>\n

     <\/p>\n

    \n
    \n<\/div>\n

    Our aim is to create a platform that offers users the most enjoyable trading experience. If you have any feedback, please reach out to us at\u00a0feedback@btse.com or on Twitter @BTSE_Official.<\/em><\/p>\n

    Note: BTSE Blog contents are intended solely to provide varying insights and perspectives. Unless otherwise noted, they do not represent the views of BTSE and should in no way be treated as investment advice. Markets are volatile, and trading brings rewards and risks. Trade with caution.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where thousands of actors […]<\/p>\n","protected":false},"author":1,"featured_media":5179,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10],"tags":[],"class_list":["post-1196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"yoast_head":"\nA Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized) — BTSE Blog<\/title>\n<meta name=\"description\" content=\"Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)\" \/>\n<meta property=\"og:description\" content=\"Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/\" \/>\n<meta property=\"og:site_name\" content=\"BTSE Blog\" \/>\n<meta property=\"article:published_time\" content=\"2020-01-30T15:20:49+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-03-08T04:19:02+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png\" \/>\n\t<meta property=\"og:image:width\" content=\"4000\" \/>\n\t<meta property=\"og:image:height\" content=\"2250\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"BTSE\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@BTSE_Official\" \/>\n<meta name=\"twitter:site\" content=\"@BTSE_Official\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"BTSE\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized) — BTSE Blog","description":"Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/","og_locale":"en_US","og_type":"article","og_title":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)","og_description":"Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where","og_url":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/","og_site_name":"BTSE Blog","article_published_time":"2020-01-30T15:20:49+00:00","article_modified_time":"2023-03-08T04:19:02+00:00","og_image":[{"width":4000,"height":2250,"url":"https:\/\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png","type":"image\/png"}],"author":"BTSE","twitter_card":"summary_large_image","twitter_creator":"@BTSE_Official","twitter_site":"@BTSE_Official","twitter_misc":{"Written by":"BTSE","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#article","isPartOf":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/"},"author":{"name":"BTSE","@id":"https:\/\/www.btse.com\/blog\/#\/schema\/person\/46ad80e1bffe6cf5d79938127822f2ca"},"headline":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)","datePublished":"2020-01-30T15:20:49+00:00","dateModified":"2023-03-08T04:19:02+00:00","mainEntityOfPage":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/"},"wordCount":1016,"publisher":{"@id":"https:\/\/www.btse.com\/blog\/#organization"},"image":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#primaryimage"},"thumbnailUrl":"https:\/\/i0.wp.com\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png?fit=4000%2C2250&quality=75&ssl=1","articleSection":["Opinion"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/","url":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/","name":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized) — BTSE Blog","isPartOf":{"@id":"https:\/\/www.btse.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#primaryimage"},"image":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#primaryimage"},"thumbnailUrl":"https:\/\/i0.wp.com\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png?fit=4000%2C2250&quality=75&ssl=1","datePublished":"2020-01-30T15:20:49+00:00","dateModified":"2023-03-08T04:19:02+00:00","description":"Mining is one of the most dynamic aspects of the Bitcoin network, and one which has evolved and expanded remarkably over the years. What started as a Proof of Work-powered \u201cone CPU one vote\u201d system in Satoshi Nakamoto\u2019s whitepaper from 2009 has developed to become an activity for specialized hardware (ASICs) where","breadcrumb":{"@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#primaryimage","url":"https:\/\/i0.wp.com\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png?fit=4000%2C2250&quality=75&ssl=1","contentUrl":"https:\/\/i0.wp.com\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png?fit=4000%2C2250&quality=75&ssl=1","width":4000,"height":2250,"caption":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)"},{"@type":"BreadcrumbList","@id":"https:\/\/www.btse.com\/blog\/a-brief-history-of-bitcoin-mining-and-why-it-s-getting-more-decentralized\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.btse.com\/blog\/"},{"@type":"ListItem","position":2,"name":"A Brief History of Bitcoin Mining (and Why it\u2019s Getting More Decentralized)"}]},{"@type":"WebSite","@id":"https:\/\/www.btse.com\/blog\/#website","url":"https:\/\/www.btse.com\/blog\/","name":"BTSE Blog","description":"Navigating the Crypto Frontier - Insights, Analysis, and Strategies","publisher":{"@id":"https:\/\/www.btse.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.btse.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.btse.com\/blog\/#organization","name":"BTSE","url":"https:\/\/www.btse.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.btse.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/btse-logo.png","contentUrl":"https:\/\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/btse-logo.png","width":1007,"height":306,"caption":"BTSE"},"image":{"@id":"https:\/\/www.btse.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/x.com\/BTSE_Official","https:\/\/discord.com\/invite\/btse","https:\/\/www.linkedin.com\/company\/btsecom\/","https:\/\/t.me\/btsecom"]},{"@type":"Person","@id":"https:\/\/www.btse.com\/blog\/#\/schema\/person\/46ad80e1bffe6cf5d79938127822f2ca","name":"BTSE","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/dc01110861deb9c4a6b15c6c841e4457320749d7c005164340fbf8d4eacefc5d?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/dc01110861deb9c4a6b15c6c841e4457320749d7c005164340fbf8d4eacefc5d?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/dc01110861deb9c4a6b15c6c841e4457320749d7c005164340fbf8d4eacefc5d?s=96&d=mm&r=g","caption":"BTSE"},"sameAs":["https:\/\/www.btse.com\/blog"],"url":"https:\/\/www.btse.com\/blog\/author\/btseadmin\/"}]}},"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.btse.com\/blog\/wp-content\/uploads\/2023\/03\/f33f9f_31ab93cfd9024d888b83962648bba044-mv2.png?fit=4000%2C2250&quality=75&ssl=1","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/posts\/1196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/comments?post=1196"}],"version-history":[{"count":2,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/posts\/1196\/revisions"}],"predecessor-version":[{"id":5876,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/posts\/1196\/revisions\/5876"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/media\/5179"}],"wp:attachment":[{"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/media?parent=1196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/categories?post=1196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.btse.com\/blog\/wp-json\/wp\/v2\/tags?post=1196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}