How Bitcoin Mining Company Bitmain Monopolized Bitcoin
On March 15th 2018, Beijing based Bitcoin mining rig producer Bitmain, announced the pending release of it’s much anticipated Antminer X3. This is an Application-Specific Integrated Circuit (ASIC), a dedicated mining device in this case for mining CryptoNight algorithm coins like Monero more effective than ever. The response by the Monero dev team however might just render the $1900 machine an expensive paperweight.
How Antminer Founder Jihan Wu Monopolized the Bitcoin Mining Industry
Contrary to popular belief, Bitcoin was never intended to be mined on dedicated ASIC hardware. In fact, Bitcoin creator Satoshi Nakamoto originally envisioned a world in which Bitcoin mining would be undertaken by anyone with compatible (and PC-based) GPU hardware. Suddenly, everything changed in January 2013. Due to the release of the world’s first ASIC Bitcoin mining rig created by the Chinese company, Avalon.
The ASIC Bitcoin Mining Arms Race
With people mining Bitcoin suddenly capable of mining hundreds of Bitcoin, Chinese financial analyst Jihan Wu saw a unique opportunity. Founding his own Bitcoin mining company Bitmain, Jihan Wu helped ASIC Bitcoin mining quickly go mainstream, thanks to Bitmain’s own line of ASIC Antminer mining products. – This and no less than 36 patents protecting Bitmain’s ASIC chip technology, effectively stopping anyone from developing their own.
Why Bitmain’s Bitcoin Mining Monopoly is a Problem
The chief threat to Bitcoin from Bitmain today rests with the fact that one of Bitmain’s ASIC technology patents covers simething called ‘AsicBoost.’
Put simply, AsicBoost is an ASIC chip feature which allows Bitcoin miners to mine ‘faster’ because they reuse certain mining calculations over and in doing so, circumvent the proof of work consensus which Bitcoin uses to allocate new Bitcoin to miners who contribute the greatest amount of hashing power to the Bitcoin network.
Bitmain can also simply stop selling Bitcoin ASIC miners and mine everything themselves, they are smart enough not to but it’s safe to say their retail price is much higher than production cost.
Recently a backdoor in most ASIC’s manufacterd by Bitmain was found which grants Bitmain the ability to shut down individual miners and personally identify each miner with a MAC adress and IP adress, combined with sales records. (see antbleed.com)
How AsicBoost & Bitmain Poses a Threat to Cryptocurrency Decentralization
Because AsicBoost can be implemented covertly by those using Antminer Bitcoin mining hardware, the feature gives miners and Bitmain itself a very unfair market advantage. This is due to the fact that Bitmain and Antminer device users, can mine Bitcoin faster and therefore make more money, reinvesting profits in more Antminer ASIC hardware and R&D.
Needless to say, being able to mine Bitcoin faster while benefiting simultaneously from year-on-year 1000% Bitcoin price rises, makes Bitmain near unstoppable. What makes the rise of Bitmain particularly daunting, however, is the increasing influence which they hold over the current Bitcoin price and cryptocurrency market overall.
Bitmain and Siacoin
In January 2018, Bitmain stirred more controversy than usual, by announcing plans to start making available ASIC mining hardware capable of mining Siacoin.
A cryptocurrency which is also a cloud storage service similar to Dropbox, transparency and decentralization is vital to Siacoin. This is why Siacoin uses a hashing algorithm called BLAKE(2b); one which up until recently, resulted in it only being possible to mine Siacoin on regular consumer GPU’s.
Sadly (for Siacoin) Bitmain recently announced support of BLAKE(2b) mining using the Bitmain Antminer A3. As a result, those with Antminer A3 devices can now dominate the Siacoin blockchain and in doing so, erode trust in the idea of true Siacoin decentralization.
Bitmain and Monero
With the recently announced Antminer X3, which was supposed to mine Monero, all eyes are on the Monero development team. Riccardo ”fluffypony” Spagni, one of the most notable Monero devs has publically said on Twitter Monero will perform a hardfork to make it ASIC resistant, meaning the X3’s will be useless.
EDIT: Monero has now succesfully hardforked to prevent Bitmain’s ASIC’s from mining the cryptocurrency. Although Monero curbed Bitmain, it still has a huge monopoly over Bitcoin and other cryptocurrencies.
Bitmain and Ethereum
Bitmain is now also targeting Ethereum, the second biggest cryptocurrency by market cap. With their new F3 miner capable of mining Ethereum a lot more efficient than GPU’s, effectively killing the profitability of GPU mining. A lot of people have spoken against this stating Bitmain has been mining Ethereum for months before ‘dumping’ them now on the retail market as word came out there might be a so called hardfork to make Ethereum ASIC resistant.
The hardfork debate has been the most important topic of discussion within the Ethereum community, arguments ranging from the F3 going against decentralisation to allowing Bitmain to get an even tighter monopoly.
Will Bitmain Hold a Monopoly on Bitcoin Mining Forever?
At present, it is clear that Bitmain and the company’s founder Jihan Wu will continue to attempt to dominate the Bitcoin mining world for as long as possible. The good news, however, is that Bitmain’s monopoly of cryptocurrency mining patents may be about to be tested by a new ASIC manufacturing company called Halong Mining making the DragonMint miner series.
In late 2017, DragonMint Bitcoin miner manufacturer Halong Mining, announced the inclusion of a ‘version-rolling’ version of Bitmain’s AsicBoost technology in its own hardware. This is significant as at present, Bitmain’s own AsicBoost technology is incompatible with Bitcoin blockchain updates such as Segwit. ‘Version-rolling’ on the other hand, is both compatible with Bitcoin blockchain upgrades and operates completely transparently. This means that (in theory), Bitmain dominance of the Bitcoin mining market will decline as more miners embrace Segwit, while still being able to mine Bitcoin as fast as they would if using Bitmain’s own covert AsicBoost technology.
It is also important to add Bitmain will be affected hard by the alleged US tariffs on China by Donald Trump, mainly 25% tariffs on electronics that are important and will hit Bitmain hard if they go into effect.