Right now, the bitcoin network is highly centralized – Interview with Josh Zerlan
Mining is important for the bitcoin industry because it’s what drives the whole system. Without mining, or rather transaction processing, there is no bitcoin. I often hear that “bitcoin mining is dead” or that “why would anyone mine once the block rewards go away?” Satoshi originally envisioned the block rewards as a supplement to kickstart and to incentivize mining/miners, as well as it being a way for the currency to be released into the world at a predictable rate. As block rewards dwindle, another factor comes into play… that is the transaction fees. As we start to scale the bitcoin network, the transaction fees will start to take up the void left by the dwindling block rewards. While each individual transaction fee is a small amount, when you multiply that by tens of thousands, it can add up to significant sum. In the future, if bitcoins is $10,000 or $100,000 or more per coin, even making a fraction of a coin via transaction fees is still a huge income.
There is unlikely to be any one big miner in the future. I often hear how ASICs are killing bitcoin mining by centralizing it in the hands of large mining operations. In fact, the exact opposite is true. Right now, the bitcoin network is highly centralized. The top 4 pools, meaning 4 people who operate those pools, control the majority of the network. The top 12 pools, meaning 12 people, control 98% of the hashing power on the network right now. I would call that very centralized. ASICs will and are decentralizng that by allowing individuals or smaller companies to effectively solo-mine, decentralizing the network. We will see the large players, the cloud mining companies and the larger corporations that are mining for reasons other than pure profit solo mining. They won’t be connecting to a pool… so that means mining will be further decentralized. So there isn’t going to be big miners in the future, not like there are now… there’s 12 miners on the network, they are huge. In the future we will see many smaller miners, spread out over various corporations and individuals, as well as pools.
3. What is the most exciting topic in crypto-currencies development right now?
The most exciting topic in crypto-currencies right now is the advent of hardware wallets… at least to me. Right now, it’s very dangerous to store and use bitcoins unless you are tech savvy or have a lot of money to risk. Hardware wallets will make it much easier and safer to store and use bitcoins. It’s an area people don’t realize needs lots of attention and loving if we want to make bitcoin mainstream. It’s ridiculously difficult to setup, use and store bitcoins right now... we are so use to it that it seems easy, but go tell your grandmother about bitcoins and then say “Go get some and keep them safe and use them on daily basis.” but don’t tell or show them how. They won’t even know where to start. We need to make getting started easy and safe… hardware wallets will accomplish a large portion of that.
About Josh Zerlan:
As Butterfly Lab’s VP of Product Development and Chief of Operations, Mr. Zerlan is responsible for operations within Butterfly Labs Innovation team, as well as long term product evolution and development. He has an excellent track record of identifying industry trends, capitalizing on upcoming product and service vacuums that will present vital opportunities for fast, nimble start ups to fill. Mr. Zerlan designed, built and deployed one of the most recognized Bitcoin mining pools and has also operated a successful ISP for over a decade. He has held roles as diverse as IT, banking system administration, network & system architect, database administration, hardware development and medical robotics and image guidance. Mr. Zerlan is a U.S. Army Veteran, having served during Desert Shield and Desert Storm as a Korean linguist in the 1990′s and holds degrees in Computer Information Systems, Computer Science and Liberal Arts. He has given a number of talks at different bitcoin conferences around the world including Las Vegas, Germany, India, Argentina, and the U.S.
