Do BitMiners Pose a Threat to BitCoin Mining? Some More than Others
by Josh Anderson
MONTRÉAL, QUÉBEC – Bitcoin is hot. But as with any hot asset, that comes with risk. Usually, most conversations about the risk of bitcoin focus on the volatility of its value. However, another risk that many curious minds want to know more about is security. At CapRE’s Second Annual Greater Montréal & Québec Data Centre Summit, we connected with Francis Pouliot, Co-Founder of Research and Cryptoassets at Catallaxy. Below are his thoughts on how and why Bitcoin might be at risk of sabotage from one of its the biggest players in its eco-system.
He honed in on Bitmain, a privately-owned company headquartered in Beijing, China. Bitmain is a well-known bitcoin operation and a designer of ASIC chips that also operates Antpool, historically one of the largest bitcoin mining pools.
“Bitmain has placed some malware into its chips called AsicBoost,” explained Pouliot. “It’s a secretive, patented technology supposedly, and Bitmain is a bad actor in the Bitcoin eco-system. To be perfectly honest I am not a fan of having BitMain move over here [to Canada].”
According to Pouliot, Bitmain created BitCoin Cash specifically because they wanted to pressure the Bitcoin community to make a change. “We wanted to propose a change which would scale Bitcoin,” shared Pouliot. “They wanted to prevent this from happening and nullify their secret advantage. They tried to prevent this change from happening in order to centralize bitcoin more in the hands of the miners. And it would keep their secret advantage. So they created a new blockchain called BitCoin Cash. It was developed by the BitMain team – the BitCoin ABC client.”
However, says Pouliot, what this has actually resulted in is the creation of an “attack vector” on the bitcoin blockchain. “Because the miners will not care what coin they mine. They have a chip and they will just mine whatever is profitable,” Pouliot earnestly explained. “So if you want to, for example, attack Bitcoin, then what you can do is, at the beginning of what is known as the “difficulty retarget period” you can just ‘pump’ the price of Bitcoin Cash.”
In doing so, you could theoretically convince other bitminers to leave Bitcoin cash and go to Bitcoin. And at the same time, if you spam the network in order to increases the fees, there is this self-spiraling spiral of hash rate going down, and the time of blocks going longer, and the fees go up. So if the fees go up, you have what is called a difficulty bomb.”
And then? “Bitcoin become un-usable,” answered Pouliot. “So this is the attack vector that I’m worried about. Not the 51% attack, but creating spin-offs of Bitcoin and using market-capped metrics and manipulating the market to essentially incentivize miners to do something which is bad for Bitcoin.”
And what would that do to the miners that are legitimately mining the longest chain? Would that make their investment worth nothing?
“Technically, they can mine bitcoin cash,” Pouliot said. “They can switch to it. But realistically the miners themselves, as a mining operation, don’t really suffer. Because they are mining the most profitable coin. But if the miners are also Bitcoin holders, then yes, it would definitely hurt their wallet.”
Check out previous CapRE Insider Reports covering this panel with Pouliot:
- BitCoin is Transforming Data Centers and the Québec Arena — Are Financial Markets Next?
- Montréal Crypto-Currency Experts: Let’s Step Back From Short-Term Returns, Look to Future as a New Asset Class
- Francis Pouliot: Demand for Crypto-Mining Space in Québec is Nearly Infinite, While Supply is Limited. So Know Your Position of Strength
- Blockchain 101: What is It and How is it Different From Other Asset Classes?
- Francis Pouliot: Shake Off Bitcoin’s Volatility, It’s a “Life Raft if the Titanic Goes Down”
- Can BitCoin Be Hacked? Yes, But It’s Not Likely