Bitcoin Cash

Will 32MB Bitcoin Cash hardfork Cause Miner Centralization?

Bitcoin Cash is going for a hardfork on May 15th that will increase the block size further to 32MB from the current 8 MB. The major concern raised by experts is that this block size increase will help in miner centralization, and in turn, will become a more centralized coin rather than a decentralized trustless blockchain. We will investigate further on this and see if this hardfork will completely give the powers to the miners, or can ordinary people also run nodes to validate the transactions.

Bitcoin Cash’s Growth

Bitcoin Cash, after it forked from the Bitcoin blockchain on August 1st, 2017, grew very fast by aggressive marketing by its supporters namely Roger Ver and Chinese Bitcoin miner Jihan Wu. The coin got listed on major exchanges and many services, and wallet providers extended their support to the coin. The value of the coin increased considerably and reached a marketcap of $28 billion at the time of writing with a price of $1620.

The main supporter of this coin, Roger Ver, is aggressively marketing it and helping it in getting adopted globally. There is also an accusation against Roger on creating brand confusion by calling Bitcoin Cash as Original Bitcoin. Their website Bitcoin.com has been misguiding noobs in making them believe bitcoin cash as original Bitcoin. This made the Bitcoin community very furious, and they were raising funds to take legal action against Roger for creating brand confusion and defrauding the noobs. They finally dropped the idea of taking legal action since the funds they collected were not sufficient to fight the mighty Roger.

Bitcoin Cash’s Block Size

Bitcoin Cash has a block size of 8 MB currently, compared to Bitcoin’s 1 Mb, that can dynamically increase to 2MB with the activation of Segwit. Bitcoin and Bitcoin Cash have some major differences. Bitcoin activated Segwit as the scaling solution, while the remaining community that was in favor of hardfork went with Bitcoin Cash. Bitcoin Cash has a roadmap of increasing the blocksize periodically to match with the ever-increasing transaction volume.

8 MB block can handle 61 transactions per second approximately. The team also had a roadmap of increasing the blocksize periodically to accommodate more transactions as the adoption grows. On the other hand, Bitcoin community wants to do off-chain scaling instead of on-chain and is working on building Lightning Network. The majority of the transactions will happen on the Lightning Network (sidechain to the main blockchain), and only the final settlement will be done on the main blockchain, enabling faster transactions by eliminating heavy load on the base layer. Bitcoin Cash, on the other hand, has decided to go with on-chain scaling by increasing the block size as mentioned in the original Bitcoin Whitepaper.

Proposed Hardfork to Increase Blocksize to 32 MB

Bitcoin Cash has scheduled a hardfork on May 15th to increase the block size from 8 MB to 32 MB. This hardfork is part of their roadmap, and after this block size increase, the next increase is scheduled only in November 2019. Experts point to many red flags in this block size increase and many questions arise in the aspect of keeping the network decentralized. Experts are questioning the need for the increase when 8 Mb blocks itself are not getting full. This will create many orphaned blocks due to each block having different sizes in the blockchain.

There is also a risk of the blockchain becoming “miner centralized”. A person running a node with 32MB block size needs a highly sophisticated infrastructure with higher bandwidth to relay the blocks to other nodes. This makes it impossible to run a node by any individual and can only be run by a rich miner having a highly sophisticated data center. The individual running a node validates the rules set by the miners and this is what keeps the miners honest, giving power to the users to have a say in the direction of the network.  But due to the block size increase to 32MB, it becomes difficult for any ordinary person to run a node.

A Calculation to Prove 32MB Will Lead To Centralization

This can be explained by a simple calculation.  You relay every block you see to every one of your peers. A well-connected node can have hundreds of peers. Even 100 peers mean 3.2gb of uploads every 10 minutes. That’s almost 500gb upload per day. Residential internet connections don’t have that kind of bandwidth, which means the vast major of nodes become irrelevant, unable to keep up, and do not contribute any longer. This centralizes the network into the hands of a few miners with the heavily invested data center.

The above network bandwidth is not the only issue due to the block size increase, but the other problem is the storage. The blockchain will grow very fast at 32 MB block size, and soon we will need terabytes of SSD. A person coming from a developing nation cannot afford to run the full node. Later when we take it globally and compete with payment operators like Paypal, we need a 1 Terrabyte of the block size. The storage hardware and the bandwidth required will be out of reach for the normal user, and only a corporate data center can run them, literally making them centralized like a bank.

Signs of Miner Centralization Even Before hardfork

There are signs of miner centralization even before the hardfork has happened. Today Bitcoin-ABC, the development team of Bitcoin Cash, has sent out an incident report that contains a fix for a critical vulnerability. The document states that appropriate action has been taken to mitigate the impact of the vulnerability.

The major thing that needs to be noted here is that they have mentioned in the document that the Bitcoin-ABC developers have prepared a patch for the vulnerability and a private release has been distributed to the Few Trusted Mining Pools directly. They have also advised the Bitcoin ABC users to upgrade the latest version as soon as possible.

The above notification proves that the Bitcoin Cash is miner centralized and they have sent the patch directly to a few trusted miners privately instead of sending it to all the miners. Whale Panda criticized it and below is his tweet.

Whale

The above is proof that the network is highly centralized and in the hands of few powerful miners like Jihan Wu.

We are keeping our fingers crossed to see if the network remains decentralized after the hardfork to increase block size by 32MB or will it become miner centralized. Let us wait and watch.

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1 Comment

  1. How much a bitcoin be equal to India rupee.

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