Bitcoin Mining Expert Warns of U.S. Dominance Risks

In a recent video interview, Troy Cross, Professor of Philosophy and Humanities at Reed College, discussed his latest article for Bitcoin Magazine’s “The Mining Issue,” titled “Why the Future of Bitcoin Mining is Distributed.” Cross delved into the centralization vectors in Bitcoin mining and presented a compelling argument for the decentralization of hashrate. Despite the economies of scale that have led to the rise of mega mining operations, Cross highlighted the critical economic imperative for distributing mining power, offering insights into the future of Bitcoin’s infrastructure.

Cross outlined a scenario where the U.S. dominates Bitcoin mining, with publicly listed U.S. miners responsible for a significant portion of Bitcoin’s hashrate. However, he warned that concentrating most Bitcoin mining in the U.S. could pose risks to Bitcoin’s non-state money status. If the majority of miners reside in a single nation, especially one as powerful as the U.S., miner behavior could be influenced by political whims, potentially jeopardizing Bitcoin’s future.

Cross also discussed the potential for a nation-state attack on Bitcoin through the regulation of miners. He explained that if the U.S. government ordered miners to blacklist certain addresses, it could lead to a fork in the Bitcoin network, resulting in a government-compliant Bitcoin and a noncompliant Bitcoin. This scenario would weaken Bitcoin economically and philosophically, as the government-compliant fork would run the original code.

Cross traced the evolution of Bitcoin mining, noting that it began as a decentralized activity with every node capable of mining. However, as mining became more specialized and required dedicated equipment, it started to scale, leading to the rise of large mining operations. Cross argued that economies of scale, such as specialized tooling and data centers, drove mining to large U.S. data centers. Additionally, the ability to raise and deploy large amounts of funding, as well as the availability of power infrastructure, contributed to the concentration of mining in the U.S.

Despite the advantages of scale, Cross argued that there are also diseconomies of scale in Bitcoin mining. He noted that electricity, the primary operating cost of mining, does not travel well, making it impractical to ship electricity around the globe to a single Bitcoin factory. Instead, Bitcoin factories should be located at the sites of generation to avoid transmission and distribution costs. Cross predicted that in the future, a substantial portion of the hashrate will follow the solar path, with machines using excess solar energy to mine Bitcoin.

Cross also discussed the geopolitical implications of Bitcoin mining, noting that nation-states have incentives independent of anything Satoshi contemplated. He argued that nation-state mining could actually be good for Bitcoin, as it checks the advance of mining by large public companies. However, if a nation-state begins to produce a disproportionate share of the hashrate, other nation-states with a stake in Bitcoin’s success would also begin to mine at a loss to keep mining decentralized.

Cross concluded that the future of Bitcoin mining will be distributed and small-scale, driven by the world’s cheapest energy. He argued that the game theory of Bitcoin mining is unique, as everyone wins when no one dominates and everyone loses when anyone dominates. Cross urged Bitcoiners to hope that no country, including the U.S., mines a majority of Bitcoin, as this would be the only rational preference for the long-term success of Bitcoin.