Hash Wars Backgrounder: Know your node
In this article I hope to explain enough about bitcoin mining to allow the audience to analyze pool hash rates. Our objective is to understand what choices are available to miners and how that relates to the pie charts comparing the hash rate of each pool.
How much is the total network hash rate?
According to fork.lol, as of September 10, 2018, approximately 50 Exahash is mining the BTC chain and BCH commands about 4 exahash. One exahash equals 1,000 petahash.
I will repeat this often: the hash rates that you see for the bitcoin network and pools is only an approximation! There is a mathematical formula to infer a hash rate based on the observed frequency of blocks mined. Mining is probabilistic and block times vary making the inferred hash rate highly variable. We call this miner’s luck.
What choices do miners face about how to mine?
There are fundamentally two mining strategies: solo mining and pooled mining.
As a solo miner you are responsible for running your own node software and ASIC mining hardware. When you solve a block the 12.5 bitcoin reward (plus block transaction fees) is completely your gain. Solo mining requires considerable hash power to consistently mine blocks. In pure solo mining, the miner chooses which node implementation to run and can customize it completely to fit their needs.
Alternatively, you can choose to mine at a pool. In pooled mining, a pool operator runs the node software and entices miners to mine at the pool. When any member of the pool solves the block then everyone who is mining at the pool will receive a share of the reward in proportion to their share of the pool’s hash rate. Note that in pooled mining you do not choose which node software the pool uses, however you can switch to mine at a pool that runs your favorite node software if it were important to you. Switching pools can be done in a matter of minutes or seconds.
In pooled mining, the pool operator earns a fraction of the reward (typically less than 3 percent) for their cost of running the node software and infrastructure. The advantage of mining at a pool is more consistent payouts. In other words, payouts are smaller but more frequent than solo mining.
For completeness I must mention there is a third option. Most pools offer an option to solo mine at a pool. As a solo miner at a pool, when you solve a block you earn the 12.5 bitcoin reward less the fee that the pool operator takes. A solo miner could choose this option if they have significant hash to make solo mining worthwhile but for whatever reason they do not want to operate their own node software. In this mode the pool chooses which node implementation to run.
Who controls the hash?
There are several conclusions we can draw from the preceding discussion.
- Pool operators do not control the hash rate of miners.
- Pool operators do control which node implementation they run.
- Miners control the hash through their ASIC machines and they choose how and where to mine.
- Miners can choose which pool to mine.
- Miners can choose which chain to mine (assuming compatibility with their ASIC algorithm)
In addition, allow me to make some further observations.
- Node count does not matter. What matters is the amount of hash pointed to that node.
- Some miners might not bother to switch pools or chains at all. Yeah, we can be lazy.
Why is this all important?
Hash “solves” a block but the node software runs the rules to validate the block. If you contribute hash to a block that is rejected by the majority hash then you lose money. If there is a chain split the miners who mine the minority chain will lose.
When you are solo mining you are intimately familiar with your node implementation. However, when you pool mine you may not be aware of which node implementation you are ultimately communicating with. The pool operator sits between you and the node.
Know your node.
How can we analyze the current BCH network hash?
First, you need to know which actors are pool mining or solo mining and which node software they are running. A complete analysis would also estimate how strong the hash rate is attached to the pool and how likely it could be swayed to switch allegiance.
Duly note that this network breakdown is a rough approximation of hash rate for each miner! No one individually polled each miner on the network to find out how much hash they have and where they are mining. Instead a calculation was used to infer a hash rate based on the actual blocks found for each pool. This is critical for proper analysis. Just because a pool’s share of the hash rate changes daily on these diagrams it does not mean that there are more or fewer ASICs mining at that pool.
Let’s do some quick analysis based on what is publicly known at this time. We know that Coingeek and BMG will be on SV by November. We also know that Bitmain is aligned with ABC.
I am not aware of which node software some of these pools operate and therefore my analysis is incomplete but the above table can be used as a starting point for your own analysis.
From the above analysis you should be able to conclude that solo miners are the strong hands in the hash war as they operate both the ASIC machines and the node software.
Public pools do not directly own the ASIC machines and therefore the hash rate at a pool is more variable since pool miners can easily switch pools.
I hope this article has given you some insight into the coming hash war.
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