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Bitcoin’s resilience to change is one of its most important functions in becoming a reliable means of preserving value. However, users have to be very patient when it comes to key updates such as Schnorr and Taproot signatures, as it takes years to deploy them safely.
When it comes to mining, things are a little different. Change doesn’t happen overnight, but miners who don’t adapt and keep their finger on the pulse of the industry are likely to be left behind sooner or later. Bitcoin network hashrate increased by almost 200% in the last year. This means that players in the mining industry are actively competing with each other and trying to find ways to keep up.
Mining remains the least understood area of the Bitcoin ecosystem. After the publication of the Stratum V2 documentation and specification, it became clear that bitcoin users and miners have a different approach to evaluating the new version of the protocol. While bitcoiners mostly appreciated the decentralization improvements, miners were interested in other changes, many of which could actually increase bitcoin’s popularity in the short term.
Developments in mining
When the world’s oldest mining pool, Slush Pool, mined its first block in 2010, most blocks were created on enthusiasts’ personal computers in North America and Europe. Today, a single next-generation ASIC provides about 700 times more hashing power than all the miners of the time.
Mining technology has come a long way, along with the business side of the industry – from no competition per se, the ecosystem has moved to an active struggle for supremacy among producers and pools.
Today’s miners tend to be more focused on net profits than on supporting Bitcoin fundamentals. That’s not to say there aren’t idea-oriented miners who care about the success of Bitcoin as a whole – there are still plenty. However, you can’t expect people running large mining farms with hundreds of petahes to switch to Stratum V2 just because it improves decentralization.
If Stratum V2 can’t impact a miner’s bottom line, it’s likely that companies won’t be switching to it. Businesses have two ways to increase net profits: increase revenues or decrease costs. So what could motivate the most business-oriented and least ideologically committed Bitcoin miners to start implementing Stratum V2?
The problem of hashrate theft
The Stratum V1 version of the protocol has a serious security flaw: it is vulnerable to man-in-the-middle (MITM) attacks. The worst kind of attack is hashrate theft, in which a malicious third party can steal the miner’s work before it reaches the target pool, thereby gaining the reward for themselves.
Even worse for miners, an attacker can steal hashrate completely undetected. If the attacker is smart and stealthy, he can steal only 1% or 2% of the hashrate. It’s enough to affect a miner’s profits, but not enough to make the miner notice the attack.
In Stratum V2 this vulnerability has been fixed. Connections between miners and pools are encrypted with AEAD, a block-level encryption mode that protects the integrity of data transfers.
Developers of the protocol have repeatedly received reports from miners in China, Kazakhstan, Russia, and Europe who suspect hashrate theft. The very existence of the risk of hashrate theft is a serious incentive for businesses to switch to Stratum V2 and start encrypting their messages. The fact that hashrate theft can go undetected for a long period of time makes the problem important for everyone.
Increased efficiency lowers overhead
Managing a mining pool with a global customer base is not the cheapest venture. Requires staffing a skilled development team and maintaining geographically distributed servers in close proximity to as many pool client capacities as possible. Pools process millions of data packets over tens of thousands of individual physical connections every day. Stratum V2 reduces both the size and the amount of data transferred. In other words, it makes pool maintenance easier and more affordable.
As far as actual miners are concerned, increased efficiency may not be as strong an incentive for some as it is for others. Many miners pay a fixed price for hosting their devices, which includes the cost of Internet infrastructure and the data used to communicate with the pools. However, there are many other miners located in extremely remote locations where traffic is expensive and bandwidth is limited. For them, switching to a new version of the protocol can make a big difference in efficiency.
Furthermore, the multiplexing feature in Stratum V2 enables miners to mine multiple coins over a single connection. Miners can more efficiently switch between coins to increase profits (for example, between BTC, BCH and BSV) or even send hashrate to multiple pools simultaneously over the same connection.
Finally, the simplified mining mode for ASICs gives miners the ability to avoid processing data through the full Merkle tree route by simplifying the firmware and validation work for pools. Such mining simplifies the management of large farms, optimizes future protocol updates, and results in lower hash rate variance for miners. As a result, end-users get the following benefits with Stratum V2:
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Less complicated set up and start of mining
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Lower Internet infrastructure costs
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Adding more sophisticated use cases that can increase revenue and/or lower costs
Full implementation in BOSminer simplifies Stratum V2 implementation
Braiins, the company that runs Slush Pool and develops the Stratum protocol, also creates firmware for ASIC miners. This allows developers to create a complete implementation of Stratum V2 in the open source component of the BOSminer firmware, which will be free for the entire Bitcoin mining community.
In addition, Braiins has developed proxies for translating Stratum V2 to Stratum V1 and vice versa. This means that miners can use V2 when mining in a pool that does not support it, and that pools can implement V2 without forcing their miners to use it.
Thus, miners who want to use Stratum V2 don’t have to solve the problems of implementing the protocol on their own. Instead, they can simply replace CGminer with BOSminer in the firmware of their devices. This significantly reduces the cost of switching to Stratum V2, which may be enough to attract a large group of miners.
Stratum V2 was designed to solve as many industry problems as possible, and the developers are confident that it will make life easier for almost everyone.Deploying the new version of the protocol will help prevent hashrate theft, increase mining efficiency while reducing overhead, and ensure easy switching between coins, thanks to a full open-source firmware implementation that is available to everyone.
It is important to note that the final version of the specification has not yet been released and Stratum V2 cannot be considered a finished product at this time. However, developers are still working on the protocol and the final specs will be publicly available soon.