Roger Ver's impulsive hashpower moves show the hidden power of pool operators in the BCH Hash War

Leo Zhang

By Leo Zhang

--Game of Thrones, Season 1; Ep7

"The instruments by which power is exercised and the sources of the right to such exercise are interrelated in complex fashion. Some use of power depends on its being concealed -- on their submission not being evident to those who render it."
-- John Kenneth Galbraith, "The Anatomy of Power"

"Proof-of-work is essentially one-CPU-one vote."
-- Satoshi Nakamoto, Bitcoin whitepaper

Zealots and salesmen will tell you cryptocurrency networks are decentralized, like little peer-to-peer Utopias. In reality, power swings like a pendulum between miners, developers, and full node operators. But even this assessment is reductive, because it ignores the power dynamics inherent in the way miners organize. The behavior of mining pools in the Bitcoin Cash "hash war" demonstrates how these groups mete out conflicts in practice, and provides a rare glimpse into miners' motivations.

As we have previously shown, the rapid industrialization of mining has paved the way for extreme concentrations of power. We call one end of the spectrum "Delicate Balance of Terror," wherein a cartel of miners hold the network hostage by controlling more than 51 percent of the network. This amounts to a "nuclear option" wherein those miners can fork the chain, censor others' transactions, and rewrite blockchain history to double-spend their own funds.

On the other end of the spectrum is a scenario we call "Tyranny of Structurelessness." In that scenario, developers in a public blockchain project circle around a small group of cult personalities. While there is no formal and specified hierarchy, an undefined technocratic "foundation" emerges which has de facto power to take important decisions without feedbacks from other contributors.

Even if you have little interest in the Bitcoin Cash project, its power dynamics are instructive. There are quite a few articles that have done a good job explaining the conflict. Here is a composite timeline:

Prior to today's showdown, the two factions (BCH-ABC and BCH-SV) have been gearing up to recruit hashpower to support their chain and media narrative to sympathize with their cause.

One side uses grandstanding and plays on miners' self-interest:

The other side uses virtual signalling and complexity theatre:

ABC vs. BSV Hash War (Part III)-Stability Theory vs. Evolution Theory
(by Jiang Zhuo'er, founder of BTC.TOP)

With neither side of the popcorn drama willing to compromise, the network has hard-forked into two parallel chains. It is not the intention of this article to recap the split process, or to speculate on the future of the two chains. Instead, we want to highlight the role mining pool operators played.

Both sides of the fork have been actively recruiting miners support. But like politicians, they don't court individual voters; they court the equivalent of "neighborhood bosses," mining pool operators.

(Translation: New BCH Mine pool Mempool loyal to 'miner Choice', supports Bitcoin SV)

Antpool adds 90,000 mining rigs to win after Bitcoin Cash (BCH) hard fork battle

Excerpt: “Most people from the Bitmain’s marketing department went to Xinjiang to execute the profit winning points from the current situation.”

Large pool operators can easily make decisions without consulting their customers. As the hash battle became red-hot, Roger Ver's pool shifted the pool's hashrate to BCH for one whole hour. Did the operator ask for every BTC clients for the approval to migrate the hashrate to BCH, at noon ET (1:00AM Beijing time)? Highly doubtful.

The big lesson of the BCH fork so far: pool operators have way too much power in the mining stack. The experience for smaller miners when dealing with large pools is highly opaque. Miners should in theory be able to decide which chain they want to mine on, and shouldn't have to cede any power to pool operators with political motives.

What happened to BCH this week will likely happen again and again in cryptocurrency networks. When warring factions recruit pool operators to their campaign, the network enters a destructive spiral. There is no equilibrium in this game of chicken; the only outcome for BCH is network split. As to whether there will be any hashpower left on either chain after the split is complete, and the two sides have run out of funds -- that's anyone's guess.