Specialization is necessary but Bitcoiners and miners need to learn to listen to each other, says Will Foxley, Director of Content at Compass Mining.Read MoreFeedzy
The original Bitcoin client didn’t discriminate between nodes, wallets or miners. Rather, an early adopter would download the Bitcoin software, sync to the tip of the young blockchain, create a wallet and start streaming mining rewards to themselves.
Bitcoin is different today. Only “dedicated” bitcoiners run nodes. Custodial wallets are built into every fintech app imaginable. And mining is industrialized and mainstream, known for its energy intensity and political-divisiveness.
Unfortunately, much of the current dialogue around Bitcoin mirrors the protocol it interacted with: in bits and pieces. Companies building nodes tell you to run a node. Wallet builders shout “not your keys, not your coins!” And miners talk about “non-KYC sats.” Each is in it for themselves, and consequently, fights their battles alone.
Of course, there’s more to Bitcoin than the three stated parts. Exchanges, mixers and block explorers are but a few new domains within the Bitcoin industry that didn’t exist in 2009. This specialization is likely a net benefit, but also holds downsides, particularly for an industry already within the regulatory cross-hairs. An attack on one part, say proof-of-work (PoW) mining, will bleed into other areas of Bitcoin, such as privacy.
More directly, specialization leads to fragmentation and isolation, two outcomes Bitcoin must stay away from if it’s to survive another ten years. Two examples — the ESG led anti-Bitcoin mining campaign and Bitcoin’s long entanglement with privacy concerns — are prescient.
On the surface, green Bitcoin mining – wherein newly minted bitcoins created from green energy sell for a premium to ESG-focused investors – could be a boon. Wealth managers stand on the sidelines, anxiously thumbing dollars they’d rather exchange for satoshis. BlackRock holds notable shares in Microstrategy, Riot and other Bitcoin-first firms. Why not widen the pie by encouraging miners to find and utilize green energy?
Small changes are never enough, however. Regulators and investors call for more addendums to a protocol they often have little understanding of, given its novelty. Take celebrity investor Kevin O’Leary recent appearance on CoinDesk TV, calling for the widespread adoption of hydroelectric power over the mixed energy sources used by the Bitcoin network today. He further “dumped” his mining stocks (to use crypto parlance) after President Joe Biden’s cryptocurrency executive order, saying in another interview “that these [Bitcoin mining] companies can’t cut it.”
“There’s no way they can prove they’re not using carbon — bad news,” O’Leary (AKA “Mr. Wonderful”) said.
Bitcoin mixing service Wasabi Wallet serves as another example. Wasabi Wallet, a means for breaking ownership links between Bitcoin holders and their identity, shot itself in the foot last week by announcing a preemptive policy to block certain UTXOs (read bitcoins) from interacting with the protocol.
“We are trying to protect the company and the project by minimizing the amount of these hackers and scammers using the coordinator and getting us in trouble,” Wasabi developer Rafe explained in a tweet. “This should be in the rights of the company to do but believe me, none of us are happy about this.”
Privacy-focused Bitcoiners cried foul. How could a company building around non-state money fall to statist head fakes?
Bitcoin miners and privacy advocates alike have been relegated to fighting these important battles alone. Miners have resorted to hiring content teams, PR firms and aggressive marketing strategies to turn public opinion. Privacy advocates have fought on Twitter and Github, such as the longstanding dispute between Wasabi Wallet and Samourai Wallet that came to a head last week, with little interest from those in other circles.
There’s a difference between the human community of “Bitcoiners” and the protocol itself. Bitcoin interacts seamlessly: nodes keep the consensus rules, wallets self-custody funds and miners secure the network. It can’t be said the same for those building, using and running Bitcoin infrastructure. Node-builders care about nodes, as the same for wallet providers and miners.
Bitcoin is not a monolith. Rather, it’s a multi-legged stool with each leg constantly demanding support from its peers. If Bitcoin is to take the next ten years onward, Bitcoiners should note Bitcon’s original design and begin listening to every conversation, not just the ones they specialize in.
Cities across the U.S. are grappling with what it means to have cryptocurrency mining operations in their communities. Plattsburgh offers a sobering case study.
CoinDesk reporters traveled across Europe, Asia and North America to capture the diversity of cryptocurrency mining facilities.
It’s been a rollercoaster year for Bitcoin and Ethereum mining: Here is what the data shows.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.