Bitcoin mining — Bitcoin mining is the process of verifying transactions and creating new Bitcoins by using powerful computers to solve complex mathematical problems.
Miners compete to solve the problem and earn Bitcoin rewards.
The process consumes a significant amount of electricity and has become a contentious issue due to its environmental impact.
Bitcoin mining tools are software programs or hardware devices used to mine Bitcoin.
These tools use powerful computing power to verify transactions and solve complex mathematical problems to earn Bitcoin rewards.
Some popular mining tools include ASICs (application-specific integrated circuits) for hardware mining and software programs like CGMiner and BFGMiner for software mining.
Mining tools are essential for mining Bitcoin, and their effectiveness depends on their computational power and energy efficiency.
Controlling the power
One of the most frequently raised topics in the crypto space is the power of Bitcoin mining pools.
Some people describe them as making Bitcoin too centralized.
However, Stratum V2, an overhaul to Bitcoin mining, is looking to throw the question out the window.
Stratum Reference Implementation (SRI) developers recently launched the open source version of the Stratum V2 (SV2) protocol.
They said they complete “job negotiation,” which is an important feature for the wider Bitcoin industry as it provides pools with less power in transaction selection.
Mining is an integral part of what makes Bitcoin successful, as miners worldwide reap rewards for the computing power needed to secure the network.
However, if anyone equipped with the right hardware goes in alone, they are likely to lose money.
Instead, miners typically join mining pools to combine resources and improve their chances of getting Bitcoin rewards.
Since 2018, Bitcoin developers have been working on the Sv2, which would connect miners with mining pools more smoothly, making mining more secure and efficient.
“Job negotiation” is the most important piece, and it was added in the latest upgrade.
Stratum V1, while good, also had its issues.
“[In] pooled mining, [the] entire network is prone to censorship, since mining pools are a single point of failure – a trusted third party,” explained pseudonymous Bitcoin program manager Pavlenex.
“Regulators could force mining pools to not include certain transactions in a block for example.”
Once SV2 is adopted by Bitcoin mining pools, the upgrade could stop the exclusion.
Bitcoin’s endgame is to become a currency that no company or government entity controls.
However, centralization tends to pop up.
Many are concerned about Bitcoin mining pools becoming a centralizing force.
When mining pools utilize the Stratum V1 protocol, the individual controlling the mining pool has the authority to stop certain transactions.
For example, governments could use mining pools as a blockage to stop transactions they dislike.
The concerns have lingered for years, and mining pools have earned a reputation of censoring transactions.
News of SRI’s latest upgrade suggests that the task of transaction selection is instead given to individual miners, which lifts the target off the backs of mining pools.
Rather than going directly to Foundry USA and urging them to block certain transactions, governments or other censoring entities would need to individually go through all of the miners that make up Foundry to fulfill the request.
“For the entire network, the ability for miners to select transactions means that the power goes back from a handful of powerful entities back to thousands of individual miners,” said Pavlenex.
SV2 has yet to be adopted by mining pools as developers are still working on SRI.
Pavlenex shared that they’re looking for early adopters to test the software in its current development.
“We’d like to invite miners, pools, and firmware makers to help us test out our latest update, provide feedback and directly influence the direction of our development,” he said.
Pavlenex believes Bitcoin mining pools will be excited to use the new SV2 protocols.
Apart from the efficiency gains, many miners don’t want to deal with blocking transactions.
“[Pools are] likely to adopt SV2 because they don’t really want to be a central point of failure either,” he said.
“It’s a big responsibility, and our latest update helps them get rid of that pressure and risk.”