by Joseph Young
On April 6, Blockstream CTO and Bitcoin Core developer Greg Maxwell revealed on the Bitcoin development mailing list that a specific ASIC miner manufacturer had been covertly using AsicBoost to increase its mining revenue by at least 30 percent; many sources have reported it is indeed Bitmain, perhaps explaining their inertia regarding SegWit.
Developed by former CoinTerra CTO Timo Hanke and RSK chief scientist Sergio Damián Lerner, AsicBoost is a patented method designed to reduce total cost per bitcoin mined by around 20 percent.
“AsicBoost reduces the gate count on Bitcoin mining chips, improving the metrics of energy consumption (Joule per Gh) and system cost ($ per Gh/s). AsicBoost makes all the difference between a profitable and an unprofitable Bitcoin mine,” Hank explained.
However, AsicBoost is a method which capitalizes against a flaw in Bitcoin’s proof of work protocol. Specifically, as Bitcoin and security expert Andreas Antonopoulos explained, it is a method which produces imbalanced Merkle trees to obtain a 30 percent increase in revenue.
“it creates specific incentives to produce imbalanced Merkle trees in order to get a 30% boost. That's a problem,” said Antonopoulos.
Centralization of Mining, Bankruptcy of Non-Chinese Miners
According to Maxwell, who discovered the covert exploitation of AsicBoost by an undisclosed ASIC miner manufacturer, its covert usage can increase the revenue of miners and mining pools significantly, up to $100 million. But, because it relies on a flaw in Bitcoin’s proof of work protocol and creates imbalanced Merkle trees, Maxwell emphasized that the covert usage of AsicBoost can lead to centralization of mining.
“Exploitation of this vulnerability could result in payoff of as much as $100 million per year at the time this was written (Assuming at 50% hash-power miner was gaining a 30% power advantage and that mining was otherwise at profit equilibrium). This could have a phenomenal centralizing effect by pushing mining out of profitability for all other participants, and the income from secretly using this optimization could be abused to significantly distort the Bitcoin ecosystem in order to preserve the advantage.”
In fact, in May 2016, KNC Miner announced its bankruptcy. The mining firm’s CEO Sam Cole revealed that the company could not deal with the competition against miners and mining pools in China that invested hundreds of millions of dollars.
At the time, Cole believed that the magnitude of investment coming from Chinese miners did not match their revenues and profit margins. Even with the abundance of electricity and cold climate in mountainous regions in China, to Cole and the rest of the mining industry, China’s reckless investment in mining did not make much sense financially.
"Competition has increased more than we could ever imagine. When we count on it as it is about 100 millions of dollars invested the last six months. Although they have free electricity, we can not understand how they'll ever be profitable. Either know not what they do, but it's not as likely when you invest so much. Maybe they have some kind of advantage in China as we do not know or have this.”
11 months later, Maxwell and the rest of the Bitcoin community found out that Cole’s explanation of the Chinese mining community's unusual financial activity and behavior was precisely accurate. The Chinese mining industry and Bitmain, in particular, have had an advantage over the rest of the sector with others unaware.
The community discovered that Bitmain was the company Maxwell wrote about on the mailing list as Bitcoin journalist Kyle Torpey confirmed with an undisclosed source.
Legal Issues Surrounding AsicBoost Patent & Jihan Wu’s Abnormal Behavior
Various experts including Tuur Demeester noted that Jihan Wu and Bitmain Technologies Ltd are clearly stated in the patent application of AsicBoost. Under the international classification number H04L9/06 and application number 201510520251, Wu and the Bitmain team filed a patent for AsicBoost in late 2015.
Later, Bram Cohen, creator of BitTorrent, criticized Bitmain and Wu for filing a patent application for AsicBoost without crediting or incentivizing the actual investors of AsicBoost.
As more issues with AsicBoost and Bitmain’s patent application emerged, Wu began to demonstrate a rather abnormal behavior. Wu deleted all of his previous statements on social media platforms regarding ASICBOOST, leaving the community with a mystic ultimatum:
“I will come back to you. Very nice try.”
Still, many supporters of Bitcoin Unlimited and alternative Bitcoin developers including Cornell University professor Emin Gün Sirer believe that there is no conclusive evidence to prove Bitmain’s covert usage of AsicBoost. In a blog post entitled “A Thinking Person's Guide to the Latest Bitcoin Drama,” Sirer wrote:
- So far, there's absolutely no independently confirmed evidence of AsicBoost actually being used on any chip.
- If AsicBoost was actually used, we'd see ample evidence on the blockchain. This evidence would be in the form of transactions that are picked according to an algorithm that shuffles the transactions to create a sought collision, instead of sorting them by fee-per-byte.
- I do not have the time to perform a thorough study, but I manually examined a randomly picked block mined by Antfarm a few days ago. As you can also examine for yourself, the transactions are ordered essentially by fee-per-byte, which is not what we would see if they were shuffled to create collisions.
At the moment, Bitcoin Core developers unanimously agree that the only solution which can eliminate the centralization of mining caused by AsicBoost covert exploitation is Segregated Witness (SegWit). The community also believes that Bitmain and its CEO Jihan Wu are blocking Segwit intentionally in order to continue exploiting AsicBoost for increased miner revenue.
Bitmain Tech Director Says AsicBoost and Segwit are Irrelevant
Kevin Pan, the tech director of Bitmain, made an official announcement on Chinese social media platform Weibo in regard to the association of AsicBoost and Segwit. Pan stated that Segwit and AsicBoost are irrelevant due to various technical factors and denied Bitmain’s use of AsicBoost.
“AsicBoost is chip computing optimization for the first 90 bytes of block head. SegWit is optimization for the software layer. These two are not on the same layer and are not even relevant. Also, if someone uses AsicBoost technology, with current software consensus rules, you will see a very weird version number in the block head.”