Op-Ed: Challenge of Mining Centralization Unveils Bitcoin’s Elegant Design

Last year, growing problems of Bitcoin mining centralization came to light with the controversy of an AsicBoost scandal. As a largely centralized hash rate began to threaten the software’s magical property, concerns were raised that incentives at the crux of Bitcoin’s game theory had broken away.

Now, the power of miners, harnessed by economic incentives, escaped accountability by attacking Bitcoin’s SHA 2 hashcash and exploiting it. This further gained advantage through vulnerability in the network’s interface with the old world of industrial infrastructure and patents.

In facing the increasing power of hardware manufacturers, the idea emerged to make changes in proof of work to fix incentives. Some see such moves to be dangerous, as it could devastate the security of the network and create a contentious hard fork. Others are more pessimistic about ASIC-resistant algorithms, due to the flexibility of hardware engineers and manufacturers’ ability to control hardware production. This challenge that cannot simply be solved technically brings us a unique opportunity to explore this innovation and discover the technology’s elegant design.

Money as a Technology of Cooperation

The invention of Bitcoin arrived through the accumulative efforts of many minds. Before Satoshi Nakamoto shared the vision of peer-to-peer digital cash in the white paper, there were pioneers who stepped into this uncharted territory. Nick Szabo, a legal scholar and cryptographer, with his creation of bit gold inspired this breakthrough of computer science.

In the paper Shelling Out, the Origins of Money, published in 2002, Szabo traveled into the ancient past to trace precursors of money used by our ancestors. By gaining the insight of evolutionary biologist Richard Dawkins who saw money as a “formal token of delayed reciprocal altruism,” Szabo recognized the role of money in providing humans’ unique evolutionary advantage. Describing it as a “technology of cooperation,” he noted how early forms of money, such as the shells of clams, solved the problem of the risk of cheating in the exchange of favor, where reciprocity wouldn’t be made simultaneously.

Now, in this digital age and with the birth of Bitcoin, this tool for cooperation is replicated online. Satoshi, through engaging computer machines to work on mathematical puzzles of computation, found a way to check man’s selfishness that takes advantage of others’ good will. Bitcoin’s consensus algorithm enforces sets of rules across a network, by aligning incentives of all players and encouraging each to overcome selfish tendencies that prevent cooperation with a careful balance of risk and reward.

Puzzle of Altruism

The genius of Bitcoin’s protocol was developed on this understanding of the origin of money that is deeply tied to evolutionary forces within mankind. At the core of this technology lies knowledge of human nature informed by evolutionary biology. Dawkins, who authored the influential book, “The Selfish Gene” renewed the theory of evolution by putting genes rather than individuals at the center. With the term “the selfish gene,” he explained how “a gene that didn’t look after its own interests would not survive.” With this gene’s-eye view of life, Dawkins appeared to have solved part of the riddle of human nature. Yet, he stumbled upon another when he recognized acts of kindness in nature. Altruism has been one of the greatest puzzles for many biologists.

Dawkins asked, “How can selfish genes support kindness?” Charles Darwin’s theory of natural selection offered no incentive for organisms to help others. Dawkins went on, “If genes are striving selfishly to make more copies of themselves, how can a gene achieve this selfish objective by making their bearers act altruistically?” He contemplated how, in the Darwinian struggle for existence, kindness toward others seemed to counter this programming.

Partial explanations were provided in the idea of kin selection. Inclusive fitness theory argues the reason for such behavior is due to a sharing of large percentages of genes among close relatives. Another is the idea of reciprocal altruism used to explain costly cooperation between non-relatives, with a tit-for-tat strategy of “you scratch my back and I scratch yours.” Here, altruism is widely considered by biologists to be part of a survival game for genes, and nature has shown that the genes that return favor are more likely to survive. Yet, Dawkins pondered that, when it comes to humans, there seems to be something more that goes beyond what these theories can explain, for helping occurs even among those who are not close relatives and is given to complete strangers who don’t return favors.

Paradox of Human Nature

In recent years, examples of altruistic acts emerged on the internet with the waves of whistleblowers. From WikiLeaks founder Julian Assange to Chelsea Manning and Edward Snowden, we have seen individuals that acted on behalf of the public good at expense of their own well-being. These individuals demonstrated extraordinary courage, even risking their lives to protect not only the welfare of their nations, but all of humanity.

This presents an internal contradiction within humans: man is selfish and can be nasty, yet at the same time has a capacity for empathy and can act kindly to others. Dawkins found a way to embrace this paradox of human nature. He remarked how “selfish genes give rise to altruistic individuals” and asserted that the puzzle of altruism can be solved by using the concept of the selfish gene. He looked at altruism as the misfiring of selfish genes and explained how “we have a lust to be nice, even to total strangers, because niceness has been hardwired into us from the time we used to live in small groups of close kin and close acquaintances with whom it would pay to reciprocate favors.”

Civilization seems to have lost this paradox of human nature. Western construction of morality split an evolutionary force in nature into opposite tendencies. Humanity, in efforts to attain virtues that are considered positive, suppressed others that have been deemed negative and unworthy. Philosopher Jacob Needleman described how religious and moral doctrines of European cultures created a dualistic morality that “supports the radical separation of the good (however it is understood) and the evil (that which resists the good).” He noted such morality becomes “‘moralism’ when it imposes a sense of good and evil that diminishes the interconnectedness of life.”

Duality of human nature with selfishness on one hand and altruistic attributes like empathy on the other, created an internal conflict within man. This made people pit one side of human nature against the other. This one-sidedness of a human view in favor of certain characteristics over the other led to the failure of self-honesty, making it difficult for us to truly account for our deeds. Selfish parts of ourselves that are denied and condemned become dark. Efforts to eradicate this force made it more hostile and cunning. The extreme selfishness created through society’s refusal to accept human nature in its fullness has become destructive. It began to pose a threat to civilization itself.

The Value of Networked Individuals

In the last half of the 20th century, we have seen an increase in this schism of human nature. The tension of opposites that could no longer be contained, unleashed a cold war dividing the world into two competing power blocks. One sector was represented by the U.S. and Western European model of liberal democracies and the other was by Russian and Chinese communist states. Unresolved conflicts inside ourselves became ideological battles, creating a brutal competition for existence. In this grand struggle of power, Western capitalism promoted the value of the individual over the needs of the collective, while communism forced people to place the interests of a community over individuals.

Systems of governance based on political ideologies, incapable of holding the paradox of human nature, suppressed the dynamics of life. The centralized model of society, both in a form of capitalism and socialism, has subverted the force of evolution, by using money as an instrument of control to regulate aspects of human nature. The state’s oppression of self-interests of the majority led to the concentration of power in a few hands, fueling the corruption in the system. As ordinary people were held hostage by this political battle of governments, being kept in a loop of a death spiral, Satoshi found the perfect equation that could restore the paradox of human nature to end this war that is waged inside each person.

While the hierarchy of institutions divides human nature, breaking apart the value of individuality and the collective, decentralization unites them, creating a higher value of the networked individual. In Bitcoin’s open horizontal platform, what one does to oneself can be directly translated into what one does to others and vice versa. Everyone’s contribution enriches the whole network, while harmful behaviors bring loss for all. In this inclusive circle, contradiction between the logic of service to oneself and service to a group can now be reconciled. What an individual does out of one’s self-interests can become a communal act of giving because it benefits all in the network.

In this invention of free software, Satoshi liberated human nature that was bound up by intellectual property of the nation-state built on the archaic knowledge of man. Centralized systems of politics are inherently undemocratic. In this, the reform and progress of society often relies on the conscience of individuals who can demonstrate an extraordinary capacity to act altruistically as is seen by the example of whistleblowers. This requires a great sacrifice on the part of these individuals to take risks that are unsustainable.

Now, Bitcoin opens a new paradigm that is much more balanced. In this, one no longer has to sacrifice one’s needs in order to act altruistically and one does not have to give up aspirations for altruism in order to preserve self-interests. Upon economic incentives of selfishness, a spiral staircase of Bitcoin’s DNA can emerge. The incentive structure that is built upon a realistic assessment of humanity allows individuals to align themselves with their own self-interests. Through each taking risks voluntarily, the system increases the rewards for networked value.

Dormant Sleeping Codes

In the act of releasing a protocol pseudonymously online, the unknown creator of Bitcoin launched an open source development to build a new habitat for networked individuals. Responding to the good will of strangers, developers around the world came together to engage in a labor of love to work on Bitcoin. Those ambitious and adventurous ones among us all began investing precious resources to play the market. Greed of miners through the survival of the fittest mining markets have helped the network build a global level of security.

Now, in facing the threat of mining centralization, it might be tempting to jump into a quick tech fix of changing algorithms, trying to punish selfishness and combat our destructive potential within. But such solutions will likely just replicate the problem of the old system of control and possibly destroy the harmony of human nature that has been restored in the code.

Perhaps a perceived design oversight of a proof-of-work function, with its lack of resistance against mining centralization is not a flaw that needs to be fixed. Rather, it can be seen as something that could enable the vital feature that needs to be activated at a critical phase in the development of this technology. The problem that now confronts this ecosystem urges us to find solutions that are already in the protocol. Crisis can stimulate and trigger resistance from a human organism. This awakens dormant sleeping codes: sovereign users who claim their role in the network as ones who ultimately give Bitcoin value.

The integrity of Bitcoin is ensured through decentralization. This decentralization that ensures Bitcoin’s defining feature of permissionless-ness and censorship resistance cannot just be guaranteed with proof of work through people simply depending on technology. In the summer of 2017, in the midst of the storm of the scaling debacle, cryptographer and inventor of Hashcash, Adam Back reminded:

cypherpunks write code, and sovereign individuals run code? that maybe levelling up soon

The design of Bitcoin’s unprecedented immutability built with the best security practice in computer science includes the pressure for decentralization that is to be applied from everywhere.

Activation of Sovereign Users

The new stream of self-interests began to emerge in the ecosystem during the block size battle in 2017. As the threat of a contentious hard fork grew, resistance was swiftly organized from the bottom up. From the #UASF movement to the #No2X protest, we have seen the awakening of sleeping giants. Samson Mow, chief strategy officer of Blockstream and CEO of game company Pixelmatic, instigated a new game of “Proof of Hat consensus” by distributing the UASF cap across the network. What arose was a vision of cypherpunks. It placed Bitcoin’s value proposition in features that could bring a larger implication in the functioning of democracy, such as an ability to circumvent financial blockades and governments’ seizures. This came to clash with the PayPal 2.0 vision of Bitcoin, with emphasis on its utilitarian and commercial value as cheaper, faster, on-chain transactions.

Under the radar, the activation of sovereign users has been slowly occurring. Some are stepping up to fulfill their role in this network, manifesting the blueprint of this technology. Teams behind Bitseed created Bitcoin full node devices to help users around the world attain secure access to the blockchain to run full nodes and enforce rules. Bisq, an open-source desktop application, has been working to bring a P2P-based solution to the problems of centralized exchanges in order to extend Bitcoin’s decentralization.

Now, the network is finding creative ways to tackle problems of mining centralization. With an aim to break the mining hardware monopoly and bring much needed competition, Bitcoin Core contributor BtcDrak began a mining project, setting up an ASIC chip manufacturing company. While some strongly oppose it, a new initiative for the Blockchain Defensive Patent License is put forward as a way to counteract the AsicBoost patent monopoly that blocks competition, without jeopardizing the pristine protocol. Opportunities for the use of renewable energy are emerging as a way to decentralize mining. The idea is to take the excess capacity from solar and hydro energy production and use them to mine bitcoin.

The darkness of the old world that has yet to be enlightened became tyrannical. As it begins to infiltrate this new P2P network, the call is given for a wider distribution of self-interests to strengthen Bitcoin’s noble architecture. Imagination of computer science inspires us all to align ourselves with incentives coded inside our own DNA and restore the balance of human nature. Each individual’s participation in the development of this technology helps Bitcoin maintain its mathematical precision. By laying the solid foundation upon the virtue of selfishness, blocks of cooperation can be built to further improve the workings of reciprocal altruism.