The document discusses the issue of centralization in Bitcoin mining. It argues that proof-of-work leads to mining centralization as mining becomes dominated by a few large hardware owners. This endangers the decentralized nature of Bitcoin. The author proposes an alternative "Conner Consensus" where 1,000 individuals are selected to perform mining without proof-of-work, acting as a decentralized "mining congress" to address these issues. Overall, the document analyzes how proof-of-work may be failing to achieve decentralized consensus as originally intended.

1. Social elements
Social consensus mechanism
Corey Fields March 5, 2016

2. Decentralized consensus

3. Economy of scale

4. A Pen Should Write
MIT March 4, 2016

5. I can use a pen
to defend myself

6. I can use a pen
to smoke with

7. But pen manufacturers
aren’t going to lose two
years talking about how
to make pens into better
weapons or pipes

8. The essential feature of a pen is the
ability to write.

9. Writing is the sine qua non of a pen

10. Bitcoin has a sine qua non as well

11. Decentralized consensus

12. Decentralized consensus is the only
essential feature of Bitcoin

13. A decentralized consensus allows
for a currency and a distributed time
stamp ledger. It is why Bitcoin is
trustless and requires no third party.

14. Next to that, nothing else matters.
Anonymity. Smart contracts. Block
size. Miners. Wallets. Nodes.

15. Lately, however there’s been this
Block Size / Scaling debate

16. You hear things like “investors want
speed”, “customers want cheap
transactions”, “just go to 2MB
blocks”

17. Bigger blocks solve everything!

18. Yeah right.

19. This Block Size / Scaling debate is
bunk.

20. It is a proxy war

21. This an all-out battle over the most
dangerous type of centralization

22. And if Bitcoin becomes centralized
in this dangerous way, it is no
longer censorship resistant.

23. The dream is gone.
We have nothing.

24. So what’s going on?

25. “Bitcoin is as decentralized (an
institution) as possible”
– Gavin Andresen

26. “You have centralization on the low
end and the high end”
– Jeff Garzik 2015 Scaling Bitcoin

27. If the blocksize is pushed upward,
then propagation times are going
to increase, fewer individuals can
afford to mine, and there are
centralization risks.
If the blocksize is pushed
downward, fees will increase, low
cost transactions become
impossible and are forced to move
off chain, and there are
centralization risks

28. “(Centralization at the 1MB end) isn’t
a particularly dangerous type of
centralization”
– Peter Todd LTB 2015

29. So what is this dangerous type of
centralization?

30. Some say it’s the large mining pools
Hashrate Distribution 11/2/15

31. Some say it is off-blockchain
settlements like Circle or Coinbase.
Hashrate Distribution 11/2/15

32. But these are all subscriber-based
centralizations. A mining pool does
bad things we switch to another
instantly.

33. The bad dangerous centralization
isn’t mentioned in the scholarly /
journal articles.

34. Bad centralization =
The owners of the mining hardware

35. They are centralizing, but how
much?

37. Measuring decentralization
is difficult

38. Measuring Bitcoin decentralization
is impossible?

39. Is it kosher for Bitcoin to even use
the word ‘decentralized’ at all?

40. A centralized consensus is an
oxymoron like saying civil war or
jumbo shrimp.

41. Decentralization has nothing to do
with numbers of nodes, hashrate,
bandwidth, etc. It cannot be
accomplished with hardware or
software.

43. Decentralization requires
counting noses (humans)

44. Decentralization requires
limiting each nose to one vote

45. Bitcoin does neither

46. In early 2013, almost everyone in the
Meetup groups were miners. Now
none of them are. And no software
or hardware solution is going to
reverse this.

47. Folks who own massive amounts of
mining hardware opt-in. We cannot
“vote” to remove them. If they
centralize or collude, Bitcoin is
centralized.

48. The Ugly Axiom:
In any system, one can
assure anonymity or
decentralization, but not
both. The two are
inversely proportional.
Inversely Proportional

49. Even if blocks are lowered to 1k, big
miners still benefit from massive
economies of scale & access to chip
foundries. So centralization may be
inevitable.

50. To assume that miners in China are
not colluding with chip
manufactures in China to print cash
is just utter foolishness.

51. Even staying with 1MB blocks
means hardware miners will
continue to centralize exponentially.

52. Even if SegWit and Lightning
Network worked today, mining will
continue to centralize exponentially.
They just make it cheaper for the big
miners to centralize.

53. Dear engineers,
Not everything can be solved with
more technology

54. No hardware or software solution is
going to return us back to 2013
when most of the mining was done
by individuals with small rigs.

55. And switching to 2MB blocks means
we will get centralize even faster

56. This is dangerous.

57. It appears that Satoshi made a fatal
mistake.

59. Satoshi understood that voting
decentralized. But that’s all he
understood about voting.

60. The only way to decentralize
anything is by voting. Really voting.
It requires identity. And it requires
one person one vote.

61. Proof of Work is just Proof of
Wealth, and it is broken.

62. Decentralization can only be
assured if identity is assured.

63. Real human miners…provably
decentralized, infinitely faster and
infinitely more scalable

64. Is this possible?

65. If so, this doesn’t change the most
important type of anonymity

66. This leaves anonymity of
transactions entirely intact

67. So, we can either have anonymous
mining, a large unsalable network
and massive centralization or we
can have Satoshi’s dream.

68. Unless we inject a dose of old
school identity based voting into
mining we cannot use the word
decentralization and we can’t claim
censorship resistance

69. This would also help with Bitcoin
“governance.”

70. How long will it take a libertarian
mob to realize that old school
governance has some benefit?

71. No governing body has ever been as
decentralized as Bitcoin’s
“governance.” That’s bad.

72. Just ask Satoshi

73. Day one Satoshi Ran Bitcoin on 50
Machines. Why?

74. He did it to run 51% attacks on
Bitcoin. And he did lots of them.

75. Early decentralization terrified him.
He wouldn’t be able to run updates.
He wouldn’t be able to prevent 51%
attacks. The first months (years?) of
Bitcoin it was entirely centralized.

76. He sacrificed everything to achieve
his final goal. Something that no one
had ever achieved.

77. Decentralized consensus

78. From which grows a currency, a
public ledger, a trustless database,
smart contracts, etc.

79. Satoshi was focused on making a
pen that writes.

80. Bitcoin isn’t protected by math. It is
protected by us. It is people. It is
social. It requires voting. It is not a
honey badger. It is fragile. Act
accordingly.

81. My proposed solution is a Conner
Consensus. Pick 1,000 individuals to
do the ‘mining’ without proof of
work. They act as a mining
congress. This gives massive
scaling and massive
decentralization.

82. Note: All the problems mentioned in this talk apply equally to
Ethereum and every alt coin. It applies even to Proof of Stake, but
the effect is somewhat less severe. Proof of Stake like mining
relies on anonymous control that can centralize.

83. Twitter: @JamesGDAngelo