Founder of World’s Largest Bitcoin Mining Equipment Firm Criticizes Core and Segwit

Recently, Jihan Wu, the co-founder of Bitmain, a mining equipment manufacturer which supplies 70% of the world’s miners, criticized Bitcoin Core for their leadership and its solutions including Segregated Witness (Segwit).

Over the past few months, the bitcoin community has split into two support groups: Bitcoin Core or Segwit against Bitcoin Unlimited.

Supporters of Bitcoin Core including Blockchain, the world’s largest bitcoin wallet platform, Coinbase, BTCC and other businesses are emphasizing security and the introduction of two-layer solutions as their core arguments while supporters of Bitcoin Unlimited including Wu have used Bitcoin Core’s poor roadmap and leadership as their justification towards building a hard fork solution.

One interesting trend which has been evident in these arguments and the debate between the two bitcoin support groups is that an increasing number of businesses including Blockchain and Coinbase are supporting the activation of Segwit and Bitcoin Core while miners, particularly mining pools and operators in China, are supporting Bitcoin Unlimited.

This trend is important to consider as Bitcoin Unlimited has emphasized time and time again that Segwit’s inefficiency as a scaling solution makes it difficult for bitcoin companies to operate. As seen in prominent bitcoin investor Roger Ver’s statement:

“Anyone who runs a business using Bitcoin knows that the network is in serious trouble due to congestion.”

However, if two of the largest companies within the global bitcoin industry in Coinbase and Blockchain are in support for Segwit, the argument of Bitcoin Unlimited supports that the Bitcoin network is in need of Bitcoin Unlimited for the benefit of businesses can’t be justified.

What instead can be said for Bitcoin Unlimited is that if such a large number of miners and mining pools are in support for a hard fork, it is likely that the execution of a Bitcoin Unlimited hard fork could allow miners to maximize and optimize their operations, which play a large factor in securing the Bitcoin network and its transactions.

Bitmain co-founder Wu believes Bitcoin Unlimited is a better long-term solution in contrast to Segwit. Wu stated that the security risks of hard forks are being unnecessarily overthought by the community as a hard fork was executed in the past and it didn’t lead to disastrous problems.

Although Wu’s statement can be considered as a rational viewpoint since hard fork was indeed executed before, the developmental ecosystem of bitcoin and the network’s technological state is much different from what it was before. Thus, the fact that a bitcoin hard fork was executed years before can’t be used as the basis to predict the outcome of the next bitcoin hard fork.

Wu further noted:

“[Bitcoin] Core exists as dictatorship and tyranny, upholding speech control, colluding to attack people with different views, has become the biggest threat of the long-term development of bitcoin.”

Wu’s statement is similar to that of Ver’s comments on the Crypto Show which hosted a debate between bitcoin consultant and podcaster Tone Vays and Ver. On the show, Ver explained, “I’d like to quote Satoshi Nakamoto and in his own words in a public forum for everyone to see in 2010, he says that the ultimate solution is to allow blocks to get as big as they need to get and that is the bitcoin i signed up for and that is the bitcoin all of the early adopters signed up for.”

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Spice Haven Sichuan is Quickly Becoming China’s Bitcoin Mining Capital

China’s province of Sichuan is known for its spicy food flavors. Now, though, it’s becoming known as something else: a bitcoin mining capital.

It was in 2013 that China was first thought to have discovered bitcoin and since then the country has been making up for lost time in mining the digital currency.

What, though, has that got to do with the province of Sichuan?

Well, according to the China Money Network, since 2015, over 30 percent of China’s bitcoin mining machines have been purchased from the Sichuan province. Considering that around 70 percent of bitcoin’s global computational power is located within China, this southwestern region located between the Himalayas and the Yungui Plateau is making a name for itself as the bitcoin mining capital. And it’s not hard to see why this is the case.

According to the report, Sichuan’s Mabian Yi Autonomous county has a population of around 200,000 people and accounts for 10,000 bitcoin mining machines working around the clock for the digital currency.

So Why Sichuan?

For a bitcoin mining machine to mine for the digital currency it needs electricity, but it’s an expensive business as electricity can make up as much as 60 percent to 70 percent of the mining.

To avert this problem, the mining machines are found in Sichuan became it provides cheap electricity through its hydroelectric power plants. To take advantage of these cost saving measures many bitcoin mining companies have positioned themselves next to the plants.

Is It Worth It?

One of the companies with mining machines in Sichuan is Mabian Tianjia Network Technology Co., Ltd. It’s reported that the company can produce as many as 27 bitcoin per day from its 5,800 mining machines, which is $30,774 based on the current price of bitcoin at $1,139.

And yet, before rushing out to buy a bitcoin mining machine, the costs involved are high. Electricity bills can cost thousands of dollars while the profitability of bitcoin remains uncertain with the price of it remaining highly volatile.

One must note, however, that when it comes to the digital currency, the Chinese put their full effort into it.

But even though the price of the currency has risen and fallen over the last few years in China while the People’s Bank of China (PBOC) has recently laid a heavy hand on the currency, as L H Li, the former president of the Bank of China, recently said: ‘it’s impossible to kill bitcoin.’

Featured image from Shutterstock.

Chandler Guo to Open a New Bitcoin Unlimited Pool

Momentum for Bitcoin Unlimited continues to increase as a new pool is to enter the network. Chandler Guo, a well-known and liked bitcoiner in China, is to take his current hashrate of around 50P, or 1.5% of the network, out of BW.com and into a new Xpool which will mine with Bitcoin Unlimited.

Guo has further revealed a plan to raise 12 million ETC in an ICO to increase the pool’s hashrate to around 100 to 120 petahash, which would translate to around 3.5-4 percent of the network. In combination, this would send Bitcoin Unlimited to nearly 30%, a significant psychological threshold which may increase even further BU’s momentum.

ETC’s price jumped on the news, reaching new highs it has not seen since it was added to Poloniex during summer 2016. It would be its first ICO with 21 million XBTC tokens to be issued tomorrow. As dividend, some of the pool’s profits will go towards buying back and destroying the tokens, according to a google translation. An English page detailing the plan will soon be released, Guo told CCN.

ETC’s Price Jumps as an ICO is to Launch for a Bitcoin Unlimited Pool – image from poloniex

The Battle of the Hashrates

After a two-years debate on scalability, the decision has now come down to the hashrates with Bitcoin Unlimited apparently the only proposal standing as segwit has fully stalled.

The new grassroots client, created by ordinary bitcoiners for bitcoiners, has attracted a number of developers including Peter Tschipper, Andrea Suisani, Andrew Stone, Tom Harding, Dagur Johannsson, Amaury Sèchet, Tom Zander, Jerry Chan, ftrader as well as many others.

It continues the transaction capacity increase method bitcoin used for much of its existence. Without any centralized direction, miners increased the block limit from 250kb to 500kb in March 2013 to the apparent opposition of Peter Todd and Luke-Jr. That was followed by a smooth increase to 750kb and then finally to 1MB in line with demand. With Bitcoin Unlimited, miners can increase transaction capacity in roughly the same manner to 2MB or 4MB as demand requires as well as technology progresses.

It appeared during summer last year a maxblocksize increase was unlikely as miners were almost checkmated, with just one move to make. That move was made by Jiang Zhuoer, a former employee at China Mobile and founder of a new mining pool – BTC.TOP. Responding to threats of an intentional chain split if maxblocksize is increased, he told CCN three days ago that $100 million has been set aside to ensure there is no chain split after the upgrade of transaction capacity.

That statement was considered a checkmate by some. Price jumped $30, Bitcoin Unlimited surpassed segwit in hashrate share, and now a new pool is to join.

Can It Really Happen?

Some are wondering whether bitcoin can really break free and increase its very limited transaction capacity, ending the backlogs that have led to a huge number of user complaints and increased frustration.

We do not yet know. What we do know is that supporters of bitcoin unlimited appear to be highly passionate about the new client. They believe they are standing by Nakamoto.

They have been censored, banned, DDoS-ed, smeared, doxed. Kicked out of public discussion spaces, mailing lists, IRC – even had commits removed – but as some were silenced or metaphorically exiled, new advocates for Nakamoto’s vision kept rising.

Nakamoto was told that bitcoin cannot scale a number of time and that we need “bitbanks” – now known as a settlement layer. He rejected the proposition each time, insisting it can reach VISA levels.

The repetition of the bitbanks argument by Daniel Larimer shortly before Nakamoto left even led him to lose his cool in a rare instance of public emotional display. “If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.” – Nakamoto finally concluded.

If Bitcoin Unlimited continues to increase in momentum and gains more than 50% of the hashrate, some may see it as conclusive proof that his assumption, which relies on the honesty of 51%, is sound and can indeed protect this $16 billion market without any centralized control.

Whether it can actually do so remains to be seen, but the mood in many corners is slowly shifting from dreading a continuation of censorship and tight control, to that of celebration as it appears the wall that keeps transactions limited may indeed come down.

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Bitcoin Market Needs Big Blocks, Says Founder of BTC.TOP Mining Pool

Jiang Zhuoer, a former employee at China Mobile in Shanghai, the world’s largest mobile phone operator, where he led a 13-men team working on Data Warehouse and Big Data before establishing BTC.TOP, a new bitcoin mining pool that has suddenly shot to around 8% of the network’s hashrate, tells CCN in an interview:

“The market needs big blocks. If Core doesn’t want to (or can’t) give it, the market will take it by itself. No one can go against the market, unless he can show more money.”

Zhuoer, who speaks in broken English, therefore his quotes have only cosmetically been modified to make them grammatically sound, tells CCN that he learned “we can’t get big blocks from Core” in October 2015 at a HaoBTC party:

“I know big blocks are very important for bitcoin, but in October 2015 I only had thousands of bitcoins, but no btc hashrate or pool. To protect my btc, I begun to buy ASIC miners, get into the btc mining industry, and created BTC.TOP in 2017.”

He says that BTC.TOP is currently a private pool with the hashrate belonging to big miners who support Bitcoin Unlimited, a new grassroots client that continues the transaction capacity increase method bitcoin used for much of its existence. That is, without any centralized direction, miners somewhat spontaneously increased the block limit from 250kb to 500kb to 750kb and then finally to 1MB. With Bitcoin Unlimited, they can now increase it in roughly the same manner to 2MB or 4MB in line with demand as well as the progress of technology.

Current Bitcoin Unlimited and Segwit Hashrate Share – Image from nodecounter

Some have speculated BTC.TOP’s hashrate comes primarily from Bitmain, but Zhuoer states that none of the hashrate belongs to Bitmain: “Jihan Wu keeps his hashrate in antpool & btc.com” – he says, before adding:

“China has many big miners. They don’t know what happen and what is BU before I contacted them one by one, but they all support big blocks once they understand what we are arguing about. They are the silent majority.”

BU recently had a bug which unintentionally created a bigger than 1MB block due to some miscalculations. Shortly after, BTC.TOP mined a segwit block. “Just a mistake” – he says. “The pool gets block head but not the full block. To prevent wasted hashrate during the time, it will SPV mine and in SPV mine, the pool does not use BU to create blocks.”

That block was followed by many more BU blocks, so I wondered if he mines them through a Bitcoin Core client or through the Bitcoin Unlimited client. The pool “actually mines using the Bitcoin Unlimited client.” – he says. I wondered if the BU bug had affected his opinion:

“I have worked for 1 year to protect my BTC,” – he says. “My flight mileage for this year is more than the past 10 years combined. You know what that means.”

Those flights do not include “much” discussion with Bitcoin Core developers or Blockstream employees. “I don’t have hope for Core,” – Zhuoer says. “Some of Core insists on small blocks (1M or 1M+), some even want 0.3M.”

“We know that Core can only make a decision if they are in full agreement, but some of Core is against big blocks, so Core will never make a decision to update to big blocks.”

Luke-Jr stunned the bitcoin community recently when he “recommended” a 70% reduction of the blocksize to 300KB or an increase of the current transaction capacity in seven years. Zhuoer’s view of that proposal was to state:

“When you think based on big data, you see man just like man sees ants. The market needs big blocks, no one can go against the market. Who goes against the market will be destroyed, unless he can show more money.”

Luke-Jr has stated that his recommendation technically meets the requirements of the closed-door Hong Kong agreement which binds the signing miners to only run Bitcoin Core “for the foreseeable future,” based on a promise that segwit plus a 2MB maxblocksize hardfork increase will be merged in a Bitcoin Core client release. The latter hasn’t happened, with Gregory Maxwell, Blockstream’s CTO, publicly stating today “I absolutely do not support” a 2MB plus segwit hardfork.

I wondered what Zhuoer thinks of the Hong Kong agreement. His reply was short: “The last compromise of the market to Core.”

Bitcoin Unlimited Gaining Momentum

This debate has now been going on for almost two years, making it one of the longest technical debate ever, but Bitcoin Unlimited is gaining momentum. Its hashrate share has been increasing for about a month or more and may soon significantly surpass segwit.

If it nears 50%, then different dynamics kick in as it becomes clear the client is the preferred version. Businesses, which have strongly supported on-chain scaling, will want to upgrade, individuals too, as well as the rest of the miners.

Bitcoin Unlimited Node Count – Image from nodecounter

F2Pool’s co-founder, Wang Chun, told CCN in a brief interview that he currently does not plan to move to BU. Jihan Wu, Antpool’s founder, has been very vocal in calling for bigger blocks, but does not currently use the Bitcoin Unlimited client. BW signals for 8MB in their blocks, yet does not mine with Bitcoin Unlimited. I wondered why. “They just waiting for a suitable time” – Zhuoer says.

Luke-Jr has threatened a PoW hardfork if maxblocksize is increased. It appears to play some role in the hesitancy of other miners, but Zhuoer thinks he has a solution. He says:

“We have prepared $100 million USD to kill the small fork of CoreCoin, no matter what POW algorithm, sha256 or scrypt or X11 or any other GPU algorithm. Show me your money. We very much welcome a CoreCoin change to POS.”

Any blockchain can be made inoperational by what is called a 51% attack. If someone controls the majority of the hashrate, they can fork or orphan blocks, preventing transactions. Luke-Jr has shown this in practice when he successfully attacked an altcoin while controlling the Eligius mining pool.

At the very beginning, an open public blockchain is usually very vulnerable with security a significant worry during bitcoin’s early days. Now, it would take careful planning, many months, as well as probably a billion or more to attack bitcoin and doing so without it being known before hand during the purchasing or the designing of the hardware process would probably be very difficult.

In any event, there would be no incentive to attack rather than earn the reward, but for a PoW fork of bitcoin, miners, who have invested hundreds of millions, if not more, in their hardware, would have a clear incentive to make the forkcoin inoperational.

“Some Core developers also think big blocks are necessary, but Core can’t make a decision without full agreement. That’s the key.” – Zhuoer says.

The permissionless nature of bitcoin allows anyone to enter the market and contribute towards Nakamoto’s consensus which relies on the honesty of 51% of miners. On that point, I asked Zhouer whether he has any plans to expand:

“Yes, we will get 10% in 3-6 month, maybe 15% in 12 months. There are many Chinese big miners in our pool, they will buy more miners in 2017. Many come from traditional industries. You cannot imagine how much money they have, buying miners 10 million at a time. They need big blocks to release the BTC price.”

Bitcoin’s Current Hashrate Distribution – image from blockchain.info

It’s an interesting twist in bitcoin’s story. To protect their bitcoin investments or due to personal convictions, new miners are entering, some leaving their cushy jobs. As their hashrate grows to meet market demand, established miners gradually reduce in hashrate, eventually being fully replaced.

It’s a purely free market design with added complicated incentives, a design that perhaps may this year prove it can protect the $16 billion market.

Featured image from Shutterstock.

Chinese Police Shut down Illegal Bitcoin Mining Farm

According to Chinese publisher Xin’an Evening, Chinese police took down an illegal bitcoin mining farm in Bengbu, Anhui Province. The mining farm was using electric power from a local electric power company’s energy source to fund their operations and acquire bitcoin, as a total of 50 ASIC miners were seized.

In China, power is seen as a state-owned property. A family was running the illegal bitcoin farm and, according to the Xin’an Evening, made enough money to finance up to 8 years of future expenses they could’ve had.

The family was arrested after inspectors found out they were the cause of an electricity consumption surge. The electric power company reportedly lost over $140 a day for over 6 months.

A Cable Gave Them Away

The local electric power company reportedly experienced a loss rate of roughly 5%, but since May 2016 it experienced a loss rate of 97%. As such, it launched an investigation in order to determine what caused the power surge. After searching every local household, it seemed nothing was out of the ordinary.

At the end of November, inspectors discovered a white cable attached to a starter box in a building. The cable led to an apartment. The apartment’s windows had a dark curtain in front of them, and bricks in front of the door so no one could see inside. Yet, the sound of machines operating wasn’t concealed, so the apartment was broken into.

Inside, inspectors found the 50 ASIC miners at work. The power company did the math and, according to them, each one of the miners was consuming 1000w/h. That led to a total of 1224 KW a day, leading to a $140 daily loss.

The family allegedly managed to make a profit of over $27.000 over the past six months. Three other bitcoin mining sites were cracked down this year, leading to the arrest of 77 miners.

It’s still unclear whether or not the family will have to compensate the power company for its losses.

Image from Shutterstock.