March 25, 2023

BetterHash: decentralized bitcoin mining with new hash protocols

Betterhash Is the name of alternative mining protocols that allow miners to switch to a new mining pool using these protocols orcontinue to use another pool that supports both old and new protocols, which, at the same time, allows for a gradual transition to new protocols. In any case, the initial transition must be supported by a sufficient number of miners so that mining remains profitable, otherwise the income may become too unstable. Ultimately, miners must understand why they need to switch, and the pool operators must be far-sighted enough to abandon the current model of work. This can only happen if the problems and risks of the existing system are recognized and correctly formulated. However, the decision is not a fork or a change in consensus rules.

What is wrong with the Bitcoin mining industry right now?

There is a clear problem in the bitcoin mining industry. Mining pools are not the miners themselves, but miners are extremely dependent on these pools. Pools start a node, create blocks, select transactions for processing, and decide which fork to use for the hash power of miners. This creates some problems and certain rather undesirable political levers. BetterHash seeks to solve these problems by transferring these functions to the miners themselves and, accordingly, by depriving mining pools of their influence for the common good of the network. BetterHash will allow miners to control the use of their capacities, and pools will simply coordinate and distribute the reward.

General distribution of capacities among mining pools compared to the internal distribution of capacities in Slush Pool

This article is intended to highlight the current models of mining pools that are excluded when using the BetterHash protocols, working primarily in the interests of the miner.

It is immediately worth noting that traditional miningpools can be hacked and used by an attacker for illegal purposes. But first, you need to briefly consider the structural differences between what exists now and what will change when using the BetterHash protocols.

Currently, many miners do not evenEngaged in self-launching nodes - they simply connect their ASICs to the mining pool using protocols such as Stratum. The pool itself launches the node, selects transactions, creates a block that it wants to mine, and then sends this block to the miners for hashing. As soon as the miner successfully extracts the block, it sends it back to the pool for subsequent inclusion in the Bitcoin blockchain.

In the case of BetterHash, miners individuallystart their own nodes, select transactions, create a block, and then mine it. The block is immediately configured to pay the pool, and, like using the Stratum protocol, these blocks will be used by miners to prove that they were mining all the time for this pool.

By preventing the pool owner from deciding which block the miners will mine, BetterHash solves centralization problems by proposing a new protocol based on this concept.

Last year's presentation of Matt Coralloprovides a more technical overview of the BetterHash protocols. But, in order to realize how important this is, there is no particular need to understand the specific implementation of the code. Even just conceptually - BetterHash is objectively better than existing solutions.

Status quo

To understand the importance of switching to BetterHash protocols, you need to consider all the problems associated with the state of affairs for miners, which would not exist if BetterHash were used.

To begin with, it is worth noting that independentMining brings floating income, so pools have existed since 2010. At the same time, critics, relying on the hashrate distribution table, say that mining in Bitcoin is centralized, which counters as arguing that miners can simply switch to any other pool, although this is not always so simple.

If you are a miner, then your real opportunitieslimited to just a few large mining pools, each of which has its own terms of service, and which you can agree or disagree with. And this, despite the fact that the monopoly pools are too large to offer a diverse set of options.

As a result, you have no choice but tohow easy it is to choose the most suitable pool for you. And if all the pools or most of them decide that some practice that you may not like or disagree with is the norm, you will have no alternative but to deal with them. After all, creating your own pool probably will not bring a steady income. The existing pools are quite large, and gathered a lot of miners under their wing, while having full control over their capacities and the ability to carry out a number of dubious things that should be considered in order.

What can pools do?

  • Determine which transactions will fall into the block and which will not;
  • To be bribed [corrupt and organized according to the mafia principle], which will allow to reorganize the blockchain on certain conditions;
  • Postpone transactions in mempool to overcharge commissions;
  • Direct power without the knowledge and consent of miners to various [doubtful] forks; [neglect of ideology and elementary honor for the sake of immediate benefits, which undermines the credibility of cryptocurrencies in general in the long term];
  • To deceive miners, in the presence of hidden motives for this;
  • Send false signals about the support by miners of any proposal or fork.

All these problems are a direct result.pool pools instead of miners themselves. In addition, in addition to the fact that pools use miners, the pools themselves can also be used by a third party. They can be hacked, and then hackers have the opportunity to potentially perform the necessary exploits or attack pools at the network level. Then the miners remain confused until the situation is clarified or switched to another pool.

With BetterHash, hackers will not be able to control the power of miners through the pool and will not have a direct impact on it.

Network-level attacks are also important, no less thanpools using the power of their miners. An attacker can disable some of the hash capacities or redirect them at his discretion. The BGP attack is quite simple, and the time and resources to execute it are relatively small.

To understand how easily a hacker can steal a hashrate of a pool and perform any of their possible exploits, it’s worth looking at the above presentation again:

Network-level attacks are discussed from 5.52 to 9.00

There is no doubt about the advantage of protocols thatcan protect against such problems, but, by themselves, solutions, especially with unheard of opportunities, do not do any work, they only demonstrate their need.

It’s important to identify some hypothetical scenarios,as well as those that have already occurred to make it easier to identify this need. It is worth familiarizing yourself with each of these negative scenarios. It should be noted right away that some are only theoretical and unlikely, while others require special conditions, while others have already taken place in one form or another.

Pools determine which transactions are included in the block.

Often, when discussing the possibility of an attack of 51%,the problem arises that you can impose a sufficient number of pools on a black list of addresses, especially if you as a miner do not care. The motivation can be coercion or just a financial incentive, and it doesn’t matter if you are a representative of the pool itself or an external miner who pays a commission to this pool.

Scenario # 1. Censorship hot wallet service

Imagine a hot wallet of any kindexchanges are blacklisted by 40% of pools, which is paid by a competing exchange. This, of course, will not interfere with operations on this wallet, but it will noticeably slow down transactions. As a miner, you probably do not think this behavior is acceptable, but you probably have no other choice, because you cannot know what your pool is doing in secret.

Scenario # 2. Transaction censorship

Perhaps the developer was so lazy that he issued code that ignored escaped transactions [on the network Zcash] ...

The tweet above demonstrates that there is nothing wrong withto take a word, but, nevertheless, it is worth considering the scenario that something like this could have been done intentionally. There are no special confidential transactions in Bitcoin, and there may never be, but still there are different types of transactions. If the pool, theoretically, has a reason to ignore them, then slowing down such specific transactions will increase the commission on them and slow down any service that uses them.

One pool controls 51% of Zcash network capacity

Pools may be bribed to reorganize the blockchain

As in the examples above, pools cantry not to include a specific transaction in the blockchain. Such a scenario cannot be implemented spontaneously or retroactively, and even if the pools want to do this, only a few are able to create software for this to act in resolving the issue without delay and the participation of miners.

Some miners may think that receiving a bribe is in their interests if they receive a portion of it. But, it is worthwhile to understand that the higher the share of miners in this business, the less the pool has for this incentive. [Poole is not profitable to share received with anyone].

Additionally, pool bribing [or pressure on him], It can really withstand the consequences of a hacker hack, but this will add even more confusion.

A similar proposal was made after hacking.Binance exchanges, and despite the fact that, in fact, the pools were not ready for this, this served as the basis for statements about the centralization of mining in Bitcoin. Although, in fact, there are simply pools that have too much power over miners, which creates the basis for abuse.

Bitmain will soon be able to take control of 51% of the Bitcoin network

Next podcast [eng] will allow you to learn more nuances on this topic, andit is worth considering that not one of the things that are discussed in it will matter when using the BetterHash protocols. After all, none of the mentioned there is worth attention if the miners themselves will create the blocks, and not the pools.

Pools may delay transactions to increase commission

In addition to the fact that pools can blockcertain transactions - they can ignore all transactions with a commission lower than a certain one, thereby increasing costs for everyone who is trying to complete a transaction. Some do not consider this a problem, because, in this case, smaller pools will take advantage of the opportunity to include these transactions in the block, because for them even a small reward is significant and in the long run this will allow them to take a leading position.

But don’t think that the problem is insignificant -more than once it was possible to observe how the consequences of such behavior led to fierce disputes regarding the increase in commissions even for a short period of time.

Yes, sooner or later a paid market will form, but now restricting the network below agreed reasonable values ​​should not be a tool for a handful of people who own large pools.

And even though at the pool levelthere is theoretically competition to counter such behavior - you can still observe empty blocks mined by some pools. As an example from the past, in several specific pools, only transactions with a commission of at least 5 Satoshi were included in the blocks, and this, despite the fact that there was still room for other transactions in the block.

Undoubtedly, for such abuse from poolscoordinated actions are required, but if the stimulus coincides, then this coordination is not something complicated and even necessary. Thus, a small group of pools gets at their disposal a tool that no one else has.

Meltem Demirors: Nothing is decentralized

Pools can do this discreetly by filling blocks.something similar to ordinary transactions with a profitable commission for themselves, which then they themselves will receive together with the transactions. This will mislead ordinary users, businesses and those who care about the size of commissions and who track them, making them believe in the reality of the new commission rate. Later, as soon as the market calmly starts paying a higher price, the pools can again adjust the rate with their own “false transactions”.

The diagram below demonstrates that at the time of its publication, miners received a reward for only ~ 7% of transactions from 50% of transactions that were waiting to be included in the block.

Spamming the network unfortunately doesn’t resultin coal for Christmas - The bottom half (50%) of the mempool (in size) accounts for only 1 / 15th (~ 7%) of the reward miners collect (in fees) for every block they find. from Bitcoin

At the same time, the amount of remuneration increased nonlinearly in relation to the average commission rate for transactions that were pending.

In other words, such a practice is beneficial for any more or less large pool.

Pools may use hashrate miners improperly

It is clear that pools choose which chainwork. The pool gives the block to the miners, actually saying: “This is my block”, and the miners mine it until someone finds it, then the pool gives them the next block.

At the same time, as a rule, miners do not follow which chain they work with, and rely on the honesty of the pool, expecting that it is the specified digital asset that is being mined.

Also, many miners do not work as a separatenode and do not verify compliance with consensus rules. In the past, this was a source of problems when pools decided not to check blocks, but instead use the SPV mining method on top of invalid blocks. But, as a miner, you need to understand that your pool is not inclined to waste time and money for nothing.


Imagine that you are a miner and are part ofno one Pool_A. You get a stable income for the power that you provide the pool. You’ve calculated everything for a long time, keep track of profitability and other indicators and nothing ever changes.

But, at some point, Pool_A decides to directyour capacity for "life support" of another digital asset, which is in a more deplorable state. At the same time, he probably does not like you or is a competitor to the option that you prefer. The pool continues to pay for the power of your SHA-256 mining rigs, but at the same time, it uses it for the extraction of another digital asset, and not the one that you think is extracted by you.

Since now there is a whole pool thatengaged in the extraction of another coin or fork, the production speed in the previous chain slows down, the reward drops, and the market is potentially fooled, believing that that digital asset has more support than it actually is.

As a miner, you probably would like to avoid such a scenario. But, unfortunately, in real life such precedents have already happened.

Pools can dishonestly with miners

Considering the previous scenario - consider notless interesting example, and how it might end. Let's say the pool is honest with the interests of miners, and, indeed, tries to avoid what could become a financial burden in the future. They give out block headers to miners, but, at the same time, indicate that they do not like the extracted asset. True, not everything is so simple - what if they are dishonest?

The distribution of hash power is what the pool openly demonstrates, but, in fact, this is not necessarily the case

If the pool shows that two chains are being mined -green (80%) and yellow (20%), and you, accordingly, start to mine the green chain through them, how do you reliably make sure that only 20% of miners really get the yellow chain? Indeed, the pool can convince any miner individually that he is in the minority, although this may not be the case.

Miners will have to coordinate their actionson any side branch of the chain and add their power there to see if they are being fooled. But, at the same time, the main problem lies in the fact that most miners are anonymous, and want to remain anonymous, remain anonymous and must remain anonymous. Therefore, such coordination is an impractical method in order to avoid fraud and manipulation.

Moreover, such a lie will not only allow freeto manipulate the power of miners, but, and misinform the community, affecting the market valuation of any digital asset. Anyone who cares about the long-term health of the Bitcoin network would like to avoid such scenarios.

Bitcoin's Memo grows as miners switch to Bitcoin Cash mining

Pools can give false signals to support a proposal or fork using the power of miners

For this kind of manipulation is not even requiredactual open circuit. The pool has all the information about its aggregate hash power even before the fact of branching, therefore it has the ability to create the impression that 80% of the capacities signal for or against any offer or fork.

Even with the fact that such a signal is uselessnon-binding - relatively small risks remain. You just need to convince a few people using your pool to temporarily signal support for something in order to move the market in the right direction.

If nothing comes out, as the case showswith NO2X, then, in any case, this will cost no loss for the mining pool itself. Any hash power continues to work regardless of the results of this work.

Each column represents a pool. The top section of each column represents the hash power that belongs to this pool, and the bottom section represents the many other miners that use this pool

Nobody knows exactly how much, in fact,The hash power belongs to the pool as a whole, and how much each of its miners individually, but additional transparency would be a bonus for most miners, who, as a rule, do not vote.

Nobody wants a scenario like this.with NO2X, and a handful of pools should not decide what is truly worthy of support and what is not. Perhaps NO2X-related events would not have occurred if BetterHash existed several years ago.

Miners did not signal support for Segwit2X - pools did it

Conclusion: promising issues

It is to be expected that, after reading this article, two different reactions may occur.

Perhaps now it’s important to emphasize them to the reader:

  1. I did not know that pools have such capabilities.
  2. This gives the impression that the pools have much more control than they actually are.

Antpool and Pools Lost Hash Rate Leadership in Bitcoin Network

Now about the ensuing considerations:

The first person probably knows little about mining and Bitcoin in general, and the second person spins in the blockchain environment, and they understand the nuances sufficient for a more accurate understanding of such scenarios.

You can also look at it from a different angle:

The first person sets a fresh vector to studythe balance of power in this system, while the second person has been spinning in this sphere for too long, he is quite comfortable, and his vigilance has dulled, as a result of which, he does not see how things are in reality and the threats associated with this.

These reactions are valid - as well as the ensuing considerations:

If pools didn’t have opportunitiesabuse in this system, in accordance with its current features, there would also be no incentive to develop more advanced protocols, and you would not read it now.

And vice versa - if the pools were such a serious threat to Bitcoin, then they would already abuse their power in an irreparable way (see BCash).

But perhaps as an alternative to suchbipolar realities should choose BetterHash. It must be fully implemented, because objectively better than what it is now. Abuse by the pools and network attacks should not be possible, and this problem can be mitigated by encouraging miners to launch their own nodes so that they can create their own blocks, and use a more advanced protocol for interacting with the pool, structured around this simple but fundamental change .

There is always the possibility that something may go wrong if we don’t identify the problem that we know how to fix - so let's fix it.

Posted by: StopAndDecrypt