In April, pseudonymous researchers Mononaut and 0xB10C confirmed a long-held suspicion that Bitmain influenced a concerning percentage of the bitcoin mining network. Today, follow-up research confirms the sway of Bitmain over ‘proxy’ mining pools.

Although bitcoin miners are technically able to switch mining pools as they wish, this research reveals that as a practical matter, many of them rarely if ever switch away from Bitmain-led work templates.

A detailed follow-up analysis applied a weighted similarity score of transaction ordering and block templates across 37% of Bitcoin’s hashrate. The analysis revealed that many supposedly independent mining pools are mostly passing along Bitmain-templated work to their miners.

Read more: New research suggests Bitcoin mining centralized around Bitmain

Specifically, Poolin and BTC.com are 99% and 98% similar to the Bitmain-operated AntPool.

Although these three mining pools are the most similar, there are even more proxy-like relationships with others. Blocks produced by pool operators Ultimus, Braiins, Binance, and Spider also have over 80% correlation to this Bitmain-led trio.

It has never been a secret that Bitmain manufactured the world’s overwhelming, physical majority of bitcoin mining machines. However, its lesser-known role in the day-to-day operations of bitcoin mining pools is now under scrutiny thanks to original research by 0xB10C.

The ongoing research series by 0xB10C and Mononaut is careful to disclaim that the similarity of work across pools and miners accepting block templates from Bitmain entities does not necessarily indicate that Bitmain controls their work.

Indeed, miners often accept Bitmain defaults and block templates out of convenience — not because they are succumbing to an explicit directive.

0xB10C operates Bitcoin network monitoring tools like miningpool-observer and peer-observer, and fork-observer. The researcher is also a long-term recipient of a philanthropic grant from OpenSats.

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The post Troubling new Bitcoin research into Bitmain mining proxies appeared first on Protos.

Ask a typical Bitcoiner to name the most influential mining company, and they would almost certainly name Bitmain. The company is by far the world’s dominant mining rig manufacturer and leads a near-majority of mining pools: Antpool and its many sockpuppets.

Quietly, however, stablecoin giant Tether has been increasing its influence with a variety of bitcoin miners across the globe.

The stablecoin giant recently invested $100 million in Bitdeer, a publicly traded company operated by a Bitmain co-founder, and it’s also the leading investor in Blockstream, Bitcoin’s leading development company.

Funded partly by Tether, Blockstream has an operating mining division and a dedicated purchasing division that securitizes Bitmain mining rigs. Bitfinex, Tether’s sister exchange, is the trading venue for the Blockstream Mining Note.

Tether has also either invested in or funded :

• Salvadoran bitcoin mine Volcano Energy
• A Bitcoin mine in Uruguay.
• Swan Mining, which has deployed over $330 million from Tether and other investors. Tether also partners with Swan in its managed mining service.
• German bitcoin miner Northern Data AG. It bought equity in the company and established its €575 million debt facility in November.
• Bitcoin miner ZettaHash.

Tether also has a mining-like operation called Luganodes focused on the Tron blockchain.

Read more: First bitcoin mining pool adds Stratum V2 feature to circumvent Bitmain

Profits from Tether capitalize bitcoin mines

In all, Tether has seemingly made good on its promise to invest at least $500 million into bitcoin mining over the past six months. If that pace of investment continues, Tether could become one of Bitcoin’s most influential mining companies.

Of course, the bitcoin mining industry isn’t large enough to absorb much more than a few billion dollars in annual investment. Total bitcoin miner revenue for an entire year is approximately $16 billion. The market capitalization for all mining companies is a single-digit multiple of that revenue.

The largest bitcoin mining companies, including Foundry, ViaBTC, CleanSpark, Marathon, Bitdeer, Riot, and MicroBT, boast values ranging from the high hundred millions to low-single digit billions. The largest company, privately held Bitmain, has sought financing at a valuation exceeding $40 billion.

One of the most profitable companies per employee in the world

Tether claims to be one of the most profitable companies per employee in the world. It reported a profit of $4.5 billion in Q1 2024, a number that exceeds the $4.3 billion in net income for the largest company in the US by assets, Fannie Mae.

Tether employs about 100 workers while Fannie Mae employs 8,100. Both companies expect to earn tens of billions of dollars in profit this year.

Of course, Fannie Mae uses the US ​​Financial Accounting Standards Board-controlled term ‘net income’ on its SEC Form 10-K when reporting its $4.3 billion in profit. Tether, in contrast, simply reported $4.5 billion in ‘profit,’ without adhering to any particular definition of that term.

If the two quarterly ‘profit’ numbers are comparable — and only Tether knows if they are — Tether claims $45 million in quarterly profit per employee versus Fannie Mae’s $530,000.

Indeed, interpreting Tether quarterly reports is more art than science. The company has never released audited financials and its executives consistently use non-standard words and phrases that don’t conform to US accounting standards.

For example, all of the information in Tether’s quarterly attestation ‘is not financial statements of Tether Holdings Limited’ yet is somehow ‘financial information extracted from its accounting records,’ whatever that means.

In any case, Tether generates an extraordinary amount of profit from interest on its reserves backing USDT and other stablecoins. Because its stablecoins are not yield-bearing for token holders, Tether simply keeps all interest income itself as corporate profit.

The company claims to hold over $112 billion worth of interest-bearing assets yet pays $0 in interest to tokenholders. Needless to say, that provides plenty of profit for Tether to invest in the bitcoin mining industry.

UPDATE 19:17 UTC, December 3 2024: Updated the piece for clarity.

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The post Is Tether becoming Bitcoin’s most influential miner? appeared first on Protos.

In response to recent news of Bitmain secretly vying for a majority of Bitcoin’s hash power, a publicly accessible bitcoin mining pool is offering an alternative for miners who want to choose their own, non-Bitmain-allocated hashing work.

For the first time ever, a bitcoin mining pool has added support for Stratum V2 custom block templates.

The second version (V2) of the largest bitcoin mining software, Stratum, now allows individual miners to choose their own block template. In other words, a miner may now select its own transactions, assemble its own block, and hash nonces appended to its own block in a race to meet Bitcoin’s difficulty threshold. 

It’s rare for miners to choose their own block template and work strictly on their own behalf. Usually, miners simply accept Bitmain’s work allocation — Bitmain-apportioned sets of nonces to hash on a Bitmain-templated block of transactions to try to win Bitcoin’s 3.125BTC coinbase block reward for Bitmain’s mining pool. 

But now, for the first time, miners may cooperate with non-Bitmain miners using Stratum V2 and the first-ever pool, DEMAND, to add support for Stratum V2 custom block templates.

Read more: New research suggests Bitcoin mining centralized around Bitmain

Bitcoin mining monopoly

If this all sounds confusing, it’s meant to be. Bitmain is the stealthy, monopolistic provider of bitcoin mining hardware, the Antminer machine. Bitmain is also the owner of the largest mining pool, Antpool. Through its fleet of machines, proprietary software, and Antpool, Bitmain further obscures its operations through reported sockpuppet pools like BTC.com Pool, Binance Pool, Poolin, EMCD, and Rawpool. 

In short, Bitmain has a corporate interest in obfuscating the reality of bitcoin mining to hide its monopolization of the industry. Obviously, it would embarrass most miners to admit that they simply accept work allocations from Bitmain as their de facto boss. Nevertheless, if new research from Bitcoin developer 0xb10c is accurate, that is indeed the reality for the vast majority of miners.

Whether accepting work directly from Antpool or from its reported proxies like BTC.com Pool, Poolin, or others, miners who hash nonces from the default Antpool template are working for Bitmain, not for themselves.

A nascent attempt at mining decentralization

However, a new option is opening up. DEMAND has launched a new publicly accessible, Stratum V2-enabled solo mining option for its mining pool. DEMAND published a guide for running the new solo mining option on Linux and Macintosh machines.

Pooling work alongside other miners is critical to compete against Bitmain. If every non-Bitmain miner were to choose their own block template, the odds of winning a coinbase reward over Bitmain would be infinitesimally small. 

Winning Bitcoin’s coinbase reward is a matter of raw, brute-force guessing of a number that meets the difficulty threshold. It is a pure numbers game; the more guesses (‘hashes’), the higher the likelihood of success. 

For this reason, if Antpool is dominating this guessing game with thousands or millions more hashes than any solo miner, its odds of winning every coinbase reward and bankrupting solo miners would be quite high. For this reason, it’s critical for non-Bitmain miners to pool their work with other non-Bitmain miners in order to have a realistic chance of success against the giant.

Pool mining using Stratum V2 custom block templates

DEMAND offers this cooperative option for solo miners. Using Stratum V2, solo miners may hash alongside other miners who choose the same, non-Bitmain block template — allowing them to compete as a team against Bitmain/Antpool miners. (Stratum V2 has a menu of common, non-Antpool block templates for willing participants.)

In summary, bitcoin mining has gained a decentralized alternative to Bitmain’s Antpool amid reports that Antpool and its alleged proxy pools have controlled a majority of Bitcoin’s hash power. Antpool’s use of sockpuppet pools has raised concerns about variations of the ‘51% attack’ or transaction censorship.

Read more: BBC mocked for ‘unfair’ Bitcoin mining article

Stratum V2 is a new protocol for Bitcoin miners and pool operators that allows miners to choose work on non-Antpool block templates. Stratum V2’s website claims that the open-source project also improves security, decentralization, and the efficiency of data transfers. It also allows individual miners to create their own templates rather than accepting work allocations.

DEMAND is the first Bitcoin mining pool to fully support the custom block template feature of Stratum V2 and means that miners can co-work on block templates without the involvement of Bitmain or any of its sockpuppet pools.

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For years, rumors have circulated that Bitcoin’s largest mining machine manufacturer has secretly centralized a majority of Bitcoin’s hash power. The theory is down to more than a simple observation of the logo stamped on most mining cases.

No, skeptics think that Bitmain’s pool itself — not just its machines — secretly creates the vast majority of blocks that are added to Bitcoin’s ledger.

A sleuth found a clue in Antpool’s block template: A manually prioritized transaction immediately after the 6.25 BTC block reward or ‘coinbase’ transaction. This new research by pseudonymous Bitcoin developer 0xb10c seemingly confirms long-rumored practices by Antpool hiding its massive operation under the names of ostensibly independent pools.

In short, it warns that despite tens of thousands of decentralized nodes, Bitcoin might actually be quite centralized from a mining perspective.

One template and custodian for supposedly independent pools

Specifically, 0xb10c detected that BTC.com Pool, Binance Pool, Poolin, EMCD, and Rawpool show signs of using Antpool’s method for prioritizing the post-coinbase transaction.

Antpool might also use a sixth pool, Braiins, but 0xb10c was still analyzing its merkle branches as of the research publication time. Nearly identical merkle branches might indicate that these five or six pools often use the exact same template as Antpool for selecting transactions to include in a block.

In other words, all of these pools often use Bitmain’s machines, often assemble transactions according to Bitmain’s block template, often prioritize the same manually-configured post-coinbase transaction as Bitmain, and often send coinbase and transaction fees to the same custodian as Bitmain.

It certainly makes Bitcoin look a little centralized.

Has Bitmain secretly centralized Bitcoin’s proof-of-work?

Founded in 2013, Bitmain is one of the oldest continuously operated Bitcoin companies. It’s also gigantic and six years ago sought to IPO for over a billion dollars.

Every miner knows that Bitmain machines generate nearly all hash power on the Bitcoin network. What’s not common knowledge is the size of Bitmain’s coinbase- and fee-sharing pool, AntPool.

According to its publicly-reported hash rate, Antpool by Bitmain claims to generate just one-quarter of Bitcoin’s hash rate. However, 0xb10c suspects it might secretly control a majority.

Because Bitcoin’s mining rewards arrive randomly to the single miner who guesses the Bitcoin difficulty threshold’s lottery-like winning number every 10 minutes, miners pool together to share work and average out these random 3.125 BTC payouts.

Prior to the halving, coinbase rewards were 6.25 BTC. On April 20, 2024, that number halved to 3.125.

Today, just three mining pools control the majority of Bitcoin’s hash rate. However, new research is suggesting that Bitmain’s Antpool has been disguising its work and submitting its winning blocks under the name of third-party pools.

That Bitmain has a near-monopoly on Bitcoin’s physical machinery is common knowledge. By far the most prevalent mining rigs performing proof-of-work hashing around the globe are Bitmain machines.

Despite its famously poor customer service and product quality variability, its proprietary ASIC technologies have made its rigs unstoppably ubiquitous.

Read more: Here’s why decentralized finance is actually very centralized

Corroborating research on Bitmain’s Antpool dominance

Mononaut found more evidence that seems to support 0xb10c’s theory that Antpool might secretly use third-party pools to cloak Bitmain’s dominance. 

Mononaut traced coinbase rewards from mining pools AntPool, F2Pool, Binance Pool, Braiins, BTCcom, SECPOOL, Poolin, ULTIMUSPOOL and 1THash, and Luxor. He found suspicious levels of cooperation from these supposedly competitive entities in allocating coinbase rewards to a shared — possibly Antpool-controlled — custodian.

0xb10c couldn’t confirm that SECPOOL and SigmaPool entirely cloned AntPool’s template, although they seemed to share a similar template. In all, it seems unlikely that up to nine major bitcoin mining pools use a shared custodian for coinbase rewards unless a single entity is behind all of their operations.

Antpool had little to say about the suspicious activities or research reports by 0xb10c and Mononaut. Its most recent English-language tweet only referenced ‘making every hash count.’

Marty Bent, Matt Odell, and Matt Corallo discussed the allegations during a lengthy podcast. Corallo agreed with 0xb10c and Mononaut: “There’s one pool that has near 50% of hash power.”

In summary, if Antpool doesn’t control more than half of Bitcoin’s hashrate through collusion with or control over other mining pools, it seems to be getting pretty close. Bitcoin developer 0xb10c as well as Mononaut found evidence suggesting that Antpool and its alleged associates might control a majority of Bitcoin’s average hashrate.

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