Not 100% sure, but from your tone it sounds like you think they are performing some kind of service. This is not true. Miners do not increase the number of transactions the network can handle. An infinitesimal amount of the electricity going into mining is actually goes to process transactions. A raspberry pi in a shoebox running mySql is capable of processing more transactions than the entire bitcoin network, liquid nitrogen and all.
All that mining does is give the person with the most hashrate more voting power in which transactions will be accepted. Innovation in mining hardware and data centers does not in any way increase bitcoin's security.
> All that mining does is give the person with the most hashrate more voting power in which transactions will be accepted. Innovation in mining hardware and data centers does not in any way increase bitcoin's security.
This is completely wrong. The higher the difficulty, the harder it becomes to attack the network, which is a critical feature. If anyone who rented a data center could attack Bitcoin at this point, it would be even less stable (much less!) than it has been already.
No. Read what I said. "Innovation in mining hardware and data centers does not in any way increase bitcoin's security."
If everyone can use technology to push a higher hashrate, then what has changed? The people who can get their hands on new mining chips first have an advantage for a little while, but in the end it's a zero-sum game. The pie is 100% of hashing power/block validation power. How can you divide a pie into more than 100%?
If a dedicated data center is more effective than a commodity data center then that increases bitcoin's security, because it means a greater proportion of the hashrate resides with people who have an expensive long-term commitment to bitcoin and it's more expensive for an outsider to match that.
That's circular logic thogh. If you built a data center capable of staging a 51% attack, you haven't made the network harder overall. You've already gained enough power to do an attack.
It might encourage others to compete, and the arms race continues. But if too much of the network is controlled by a minority, then it's not automatically more secure.
Only certain types of attacks are based on hashing at a rate which is a significant percentage of the network hash rate. Many other types of attacks have nothing to do with hashing, for example, the transaction malleability attacks.
>Innovation in mining hardware and data centers does not in any way increase bitcoin's security.
Not sure exactly what you mean here - mining, and mining faster, generally increases the computational resources another third party would need to 51% attack the network.
Only by as much as the miners themselves spend. And it's a running cost, you have to spend it every day, while an attacker would spend it only during their attack.
The only way to make a 51% attack impractically expensive is to make the network impractically expensive to run.
Anyone with enough compute can attack the network in this way. There's various scenarios depending on how much compute the attacker has, but in general as they approach 51% of the network's compute, they can start to reliably do double-spending attacks.
But, and this is arguably one of the cleverest parts of Bitcoin's design: Who is going to get all that compute setup to mine Bitcoin, and then break the very system that makes it worth having?
Not saying there couldn't ever be scenarios where it happens, but its a pretty good first deterrent to bad behavior - and its clearly intentional, mentioned in the original Bitcoin paper:
"If a greedy attacker is able to
assemble more CPU power than all the honest nodes, he would have to choose between using it
to defraud people by stealing back his payments, or using it to generate new coins. He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins than
everyone else combined, than to undermine the system and the validity of his own wealth."
In some ways, the existence of custom mining hardware is a bad thing, by reducing the spread of participants who can mine cost-effectively - essentially un-democratising the running of the system.
But on the other hand, its meant that an attacker has to invest in a lot of special-purpose hardware to attack the system (rather than just being able to e.g. rent enough EC2 nodes, or turn their entire government's cluster against Bitcoin, or whatever); which probably increases the cost of (then) destroying the system, and makes Satoshi's original Incentive argument stronger, imo.
If they wanted to torpedo the price, get routed around, and lose all that capital investment in 16nm mining fabrication. Bitcoin was designed so that attacking the network will be less profitable than joining it.
But I can imagine scenarios where its game theory might not hold - because "profitable" is measured in bitcoins. For example, Bitcoin might not be suitable for use as a reserve currency if doing so would create "political profit" for destablising bitcoin that might exceed the monetary cost.
It does specifically because it increases the barrier to entry. This means the likelyhood of an attack is lower and the cost of an attack is higher. If your Rasberry PI ledger had a market cap of multiple billions of dollars, the likelyhood of an attack that would either steal people's money or shut it down would be pretty much %100.
There are many shades of grey. It creates some centralization, thought incentives of the miners are still aligned with the incentives of the people using the currency.
You seem to be implying total centralization, which is not at all true.
