Bob Burnett has a wealth of experience in the Bitcoin mining sector. In this conversation, we cover many of the nuances of Bitcoins PoW security, and how the game theory may play out long term.
Excellent discussion. I actually looked at several miners a few months ago and watched numerous videos on the pluses and minuses of many of them. It is funny how most of the video's at one point or another always refer to it as a lottery and they provide all kind of odds depending on various metrics, but at the end of the day I came to the conclusion if I did it, it would be more for the learning experience, which seems to be Bob's suggestion. I have my own node which when set up was the only way of thinking that I could contribute to the network. I recommend everyone to do it, it easy and can be done for <$150.
This discussion certainly provided more reason to set up a small miner other than just purely a lottery ticket, and I will make the effort to circle back and pursue setting up my own miner. I was looking at the Bitaxe and the Braiins BMM-101, the wifi connectivity and the large front data screen attracted me.
While this conversation focused more from the vantage of a miner, it kind of brings up a question I asked a few months ago regarding UTXO consolidation and management. What should be best practices with the next 10 to 20 years in mind. The BTC subsidy will be <1.0 in the next 2 halving cycles (2032). The last couple of months the total reward per block has ranged in the $250k-$300K, of which 98% is the subsidy and the rest transactional fees. During this time there have been between 300k and 400k transactions/day. Although 2024 the number of transactions averaged around 500k/day. I suppose using Michael Saylor's 29% CAGR gets your to about $325k in 2030 which ultimately maintains the block compensation.
The fee structure will obviously have to flip, but what does that mean for the little guy transactional costs? Assuming the input costs will get better, and the total block compensation will have to at least match today's inflation adjusted dollars. While today it makes the most sense to watch the mempool and take advantage of consolidation during low transactional and low fee times of the day, what makes the most sense on UTXO size in planning for transactions 10 or 20 years from now? I doubt highly you will be able to open up the mempool.space and see 2sat/vB, which it currently is as I write this!! A small transaction would ultimately get wiped out by the transactional fee alone. I see why Bob mentioned a later SegWit revision which I suppose would be used to consolidate more transactions on likes of a lightening network. Would be interested in your thought process of this block compensation conundrum as it related to future day to day BTC transactions.
Lastly, can you post a link to Bob's article in Bitcoin Magazine? Hope everyone is stacking some sats this weekend!!
great insights! didn't know most mining pools are black boxes. how can you know if you're getting payed fairly for the hash provided if you don't know what percentage of the pool you are. kinda crazy this is the standard...
also, got a nice list of steps to get involved in mining:
-buy Bitaxe.
-connect to a pool (preferably Ocean from everything i've heard) and see how it works.
to get even more involved:
-buy a node, run a datum server and create my own Template.
now my only question would be, what's so important about the template that pools generate? is this a way that they get ahead and mine more blocks with a better version?
Think of the template as the transactions you choose to include in that block.
If pools make that selection, they may decide that they won't mine specific transactions for censorship reasons. If you construct the template using the default in Bitcoin Core for example, you would not censor any transactions, and go off a highest fee priority.
It's more about censorship resistance than anything else.
This was really thought provoking; thanks Check. I wouldn’t say I’m familiar with the mining game at all, but it seems to me to be the space where most of the thought experiments and looking around corners is happening in Bitcoin, likely just out of brutal necessity.
That attack scenario Bob lays out is kinda chilling, not gonna lie. Glad he’s putting it out there so people can contend with it.
Agreed, I'd never heard of that before, but it makes a lot of sense. The game theory is fascinating in that one could argue these risks are why hashrate will naturally want to decentralised. Next step is the pools to do the same.
Excellent discussion. I actually looked at several miners a few months ago and watched numerous videos on the pluses and minuses of many of them. It is funny how most of the video's at one point or another always refer to it as a lottery and they provide all kind of odds depending on various metrics, but at the end of the day I came to the conclusion if I did it, it would be more for the learning experience, which seems to be Bob's suggestion. I have my own node which when set up was the only way of thinking that I could contribute to the network. I recommend everyone to do it, it easy and can be done for <$150.
https://youtu.be/MJxEli0jqy0?si=bhilIDkWFQ04ZDXT
This discussion certainly provided more reason to set up a small miner other than just purely a lottery ticket, and I will make the effort to circle back and pursue setting up my own miner. I was looking at the Bitaxe and the Braiins BMM-101, the wifi connectivity and the large front data screen attracted me.
While this conversation focused more from the vantage of a miner, it kind of brings up a question I asked a few months ago regarding UTXO consolidation and management. What should be best practices with the next 10 to 20 years in mind. The BTC subsidy will be <1.0 in the next 2 halving cycles (2032). The last couple of months the total reward per block has ranged in the $250k-$300K, of which 98% is the subsidy and the rest transactional fees. During this time there have been between 300k and 400k transactions/day. Although 2024 the number of transactions averaged around 500k/day. I suppose using Michael Saylor's 29% CAGR gets your to about $325k in 2030 which ultimately maintains the block compensation.
https://timechainstats.com/
The fee structure will obviously have to flip, but what does that mean for the little guy transactional costs? Assuming the input costs will get better, and the total block compensation will have to at least match today's inflation adjusted dollars. While today it makes the most sense to watch the mempool and take advantage of consolidation during low transactional and low fee times of the day, what makes the most sense on UTXO size in planning for transactions 10 or 20 years from now? I doubt highly you will be able to open up the mempool.space and see 2sat/vB, which it currently is as I write this!! A small transaction would ultimately get wiped out by the transactional fee alone. I see why Bob mentioned a later SegWit revision which I suppose would be used to consolidate more transactions on likes of a lightening network. Would be interested in your thought process of this block compensation conundrum as it related to future day to day BTC transactions.
Lastly, can you post a link to Bob's article in Bitcoin Magazine? Hope everyone is stacking some sats this weekend!!
great insights! didn't know most mining pools are black boxes. how can you know if you're getting payed fairly for the hash provided if you don't know what percentage of the pool you are. kinda crazy this is the standard...
also, got a nice list of steps to get involved in mining:
-buy Bitaxe.
-connect to a pool (preferably Ocean from everything i've heard) and see how it works.
to get even more involved:
-buy a node, run a datum server and create my own Template.
now my only question would be, what's so important about the template that pools generate? is this a way that they get ahead and mine more blocks with a better version?
Think of the template as the transactions you choose to include in that block.
If pools make that selection, they may decide that they won't mine specific transactions for censorship reasons. If you construct the template using the default in Bitcoin Core for example, you would not censor any transactions, and go off a highest fee priority.
It's more about censorship resistance than anything else.
Great convo Check. Bob is a great forward thinker and we are lucky to have him.
Agreed, I learned a lot in this conversation, it was really great.
This was really thought provoking; thanks Check. I wouldn’t say I’m familiar with the mining game at all, but it seems to me to be the space where most of the thought experiments and looking around corners is happening in Bitcoin, likely just out of brutal necessity.
That attack scenario Bob lays out is kinda chilling, not gonna lie. Glad he’s putting it out there so people can contend with it.
Agreed, I'd never heard of that before, but it makes a lot of sense. The game theory is fascinating in that one could argue these risks are why hashrate will naturally want to decentralised. Next step is the pools to do the same.