How mining pools work I guess would be first question?
Mining pools vs commercial mining.
Can mining pools become centralised?
Can the state enforce kyc on mining pools?
Discussion
I don't know that much about mining pools. From what I've learned, miners can easily switch between pools, so if one pool does something shady it can quickly lose its hashrate to a competitor. Mining pools are centralizing in the sense that they organize the work for the participating miners; in particular, they select the transactions going into each attempted block. However, miners clearly understand that decentralization is key to bitcoin's value proposition, and so avoid converging on too few pools.
I guess a state can require pools that are registered as companies within its jurisdiction to kyc all individual miners participating in them. I assume this is often the case anyway because a pool and its miners have a commercial relationship, with regular payments from the pool to the miners. But since the pool itself does not have that much infrastructure associated with it (unlike the large miners) it can easily move to a different jurisdiction, at least physically.
This is perfect 👍 thanks.
👀
“The state” can only enforce within the bounds of its territory. The US has had some success with enforcement beyond its territory due to its monopoly on the financial rails of fiat, but its by no means absolute.
With that in mind, “A” state could enforce miners to only validate blocks with entirely KYCed transactions in theory, but in practice that would just mean zero mining in that jurisdiction as they’d find zero fully KYCed blocks. They couldn’t impose it on pools really as they need not be domiciled anywhere, only miners registered and physically in a territory.
There is a concern around Blackrock that they could strongarm US miners this way but all that would happen is mining would die in the US, and miners would either move abroad or liquidate their ASICS and those would then pop up somewhere else in the world.
The beauty of Bitcoin’s global nature means the game theory is always against any one State. If the US acts heavy handed then others will seize the opportunity to welcome industry in to their country. It would basically take a global war on mining with zero dissenting nations and even then you’d probably find hashpower popping up in jungles and shit.
Easier for the State to control on and off ramps through KYCed entities than via miners.
Thanks for explanation.I needed that.