Saturday 2 January 2016

Who runs the Bitcoin system? A brief of who holds the power.


This is a work in progress, so any constructive criticism is appreciated.In the beginning there were few people running btc, records indicate that Satoshi, or SN, mined more than half of the blocks in the first year. Over times hobbyists began to run nodes, often for a small amount of time before stopping. Some very few amount of people believed in the idea and ran their computers as often as they could.But times have changed and people can't use a desktop to mine bitcoins anymore. Specific hardware components called ASICs have been developed. Application specific integrated circuit chips are not like computer chips in normal computers, they are built and specialized for specific uses. Bitcoin mining companies have created their own ASICs which perform the lions share of mining these day, they also get most of the reward.Some companies produce these chips and sell them to other companies and the public, while some companies fabricate these chips and use them themselves.*There are a number of players that each have some amount of influence on the bitcoin ecosystem.MinersMining pool operatorsNodesUsersCompaniesDevelopersGovernmentsISPs*Influence of MinersMiners secure txs and holdings. Many miners all operating independently create security for the Bitcoin system. If most miners stop working then someone with enough hashing/computing power could give their coins back to themselves after they gave them to someone else. This is known as a 51% attack as this 'bad actor' needs over 50% of the network's hashing power to succeed every time.With more miners this becomes very expensive. It is thought that by spending as little as 2 Billion USD someone could buy enough hashing power to perform a 51% attack as of 2015.Miners can refuse to put into blocks any txs they don't like, blacklisting someone's chance to get their tx into the next block with whatever proportion of global hashpower that miner has. However this is usually very small, so little chance, and even so then next block is likely to contain said tx. If miners colluded they could try and censor a tx for a little while, but with many miners this would only be a delay and a difficult on at that.Miners control putting txs into blocks and creating blocks for the blockchain, they receive a generation transaction known as the 'coinbase reward' for doing so. If they stopped working they would stop getting paid. Can they control a system if they can't destroy it?*Io Mining PoolsMining pool operators run the software and full blockchain that others use to collectively mine. The bigger and faster a pool, the more blocks it will find, the more reward it will get, the more it's members will get paid, the more people will want to join it. It's the miners' computers that do the calculations but it is the pool operators that harness that hashpower and apply it, giving out more consistent rewards for everyone.But people are just doing the computations that the pool tells them, if the pool operators wants to they could try to censor txs from or to someone they disagree with, making it harder for that person to send to receive payment. But like miners their attack would only be a delay.Unless they conspired with other pool operators to in which case they would increase their chances of success. They would need over 50% of the global hashing power to succeed with this. If they shut down miners could easily move to another pool*Io NodesNodes can and often are run by altruists who want to help the network at some minor expense to themselves, if it is only time.Business, and those with a large stake in Bitcoin also run nodes but they do it for their own sake and not to help the network.Nodes receive broadcast txs, validate them, and rebroadcast them to their list of connected nodes. The network could likely sustain a large drop in nodes, but this increases the risk that any one node or group of nodes could refuse to forward txs they disagree with.*Io UsersUsers are people who spend and receive coins on some time table. Some might consider those that buy and hold coins not to be users, but that is talk for another time.If the users are unhappy with the system they might leave and use another system. If Bitcoin or any crypto has no users it has no utility, because what use is a system no one wants to use.Users have to bear the consequences of developers' decisions. They have to wait for inclusion in block, wait for conformation, pay fees, use wallets or client software, etc.If most users stop buying, selling, and txing the media will surely report on Bitcoin's impending doom, which may scare others away exacerbating the problem. Though in many stories in the past have cried wolf in this regard cryptos still exist, if there was an insurmountable problem in one crypto users would probably migrate to another option.*Io CosCompanies control things such as exchange points like websites and kiosks, wallet application and hardware, mining hardware production, websites or discussion forums, remittence or transmission applications, etc.They can publicly endorse any changes they agree with disagree with and try to sway opinion. Those with a large number of users can try and use said numbers of users as leverage for support of proposals.Each realm has a number of things it can do to influence workings or public perception.Some companies have in the past performed capacity tests on the Bitcoin network, throttling normal transactions and clogging the network. Companies and individuals with enough knowledge and malice can temporarily slow the network, but to do so require spending resources on fees.*Io GovsGovernments have exerted little influence so far on cryptos, with some agencies advocating against heavy regulation that might stifle new growth.A few governments have issued restrictions or outright bans on cryptos.Restrictions mostly apply to businesses and those that deal with local fiat. These actions might stifle start up companies that don't have large amounts of funding.Banning use of cryptos, particular ones or in general, makes it illegal for people to use. This can make cryptos less popular locally or push their use into the black market.Government exert local power and some government like to censor the internet. Crypto use is still possible but it is more difficult.*IoISPsInternet service providers, or ISPs, connect most homes and businesses to the internet. All internet traffic goes through them before being routed to the end recipient.Much web traffic these days is encrypted, but much of that encryption is weak or compromised, and a large amount of web traffic isn't encrypted at all. So anyone who taps into the connection can see what is happening. This is especially easy for ISPs who host the traffic.ISPs then have the ability to monitor some amount of web traffic, and stop thing that they don't like from getting out or to the real recipient.They also have the ability to modify data in transit and or reroute it. This means they potentially can reroute the hashpower of a mining pool to their own ends.However these actions would likely be detected quickly and corrected; and nothing like this has ever been documented.This is all part of an intro so I'm not going into great detail here, and some things aren't perfectly accurate for the sake of beginners. Interested to hear any thoughts. via /r/Bitcoin http://bit.ly/1ZGERJ2

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