Bitcoin Stratum v2 Mining Software Review Promoted by Block, Braiins

Employees work on bitcoin mining computers at the Bitminer Factory in Florence, Italy.

Alexander Bianchi | Reuters

software used in bitcoin mining just got its first update since late 2012, and a coalition of companies, including the payment giant Block (formerly Square) is trying to help push the open source protocol into an industry standard.

The move could help open up bitcoin mining to more participants by supporting lower-quality internet connections, as well as improve security so miners are properly compensated for their work.

Bitcoin operates on a proof-of-work mining model, which means miners around the world run high-powered computers to create new bitcoins and validate transactions. Mining requires professional-grade equipment, some technical knowledge, a lot of electricity, and a special type of software.

Instead of directly accessing the bitcoin protocol, the vast majority of miners today work through an intermediary protocol called Stratum, which facilitates communication between the bitcoin network, miners, and mining pools that combine the power of Hash from thousands of miners around the world.

Miners use Stratum to submit their work and collect a reward if they successfully complete a new block of transactions.

On Tuesday, a coalition of bitcoin developers will release version 2 of Stratum under an open source license for evaluation and testing by the mining industry.

It will take some work to convince the mining industry to adopt the new protocol, which is why Spiral, a subsidiary of Jack Dorsey’s payments company Block (formerly Square), is partnering with bitcoin mining company Braiins. to launch a group to test and fine-tune open source software before they drive mass adoption.

what the update does

Steve Lee, the leader of Spiral, tells CNBC that the upgrade has several significant benefits, including reduced data usage.

Currently, it is common for each mining team in a large farm to connect directly to a pool. This setup wastes a lot of power. Lee says that Stratum V2 supports a proxy that aggregates all connections and only makes one connection to the pool.

The process of sending that data is also changing to a more efficient method.

“In total, much less data needs to be transmitted between miners and pools, and this could help miners in remote regions of the world with poor internet,” Lee noted.

The update is also designed to improve security. Nowadays, it is possible to steal a miner’s hash rate, which can cause some miners to lose money. To resolve this, Lee says that Stratum V2 introduces a standard security mechanism with authentication and encryption between miners and pools.

The version that will be released on Tuesday is for initial testing, and a more robust version will be released in early November that supports additional features, including job trading, a “feature that represents a historic change in the censorship-resistant mechanics of bitcoin mining by replacing the responsibility of a pool to assign work to miners with the ability for miners to select their own work,” according to a joint statement released by Spiral and Braiins.

There are orders of magnitude more miners than pools, so if miners select transactions, it’s much more decentralized than just a handful of pools, Lee explained.

“Working towards industry-wide adoption of the updated Stratum protocol is one of the most important developments in improving the decentralization and censorship resistance of the bitcoin architecture,” Lee said.

Timing-wise, pilot and integration tests are due this fall, and next year the updated protocol will likely see increased adoption once miners and pools are confident it’s working well.

“I would anticipate a gradual increase in the hash rate in 2023,” Lee told CNBC, referring to a term for the collective computing power of the bitcoin network. “Reaching a 10% hash rate by the end of 2023 would be a huge success,” Lee continued.

Lee added that it will likely be several years before the latest version of Stratum replaces the original.

“Miners are well aware of the benefits of upgrading to Stratum V2, but pushing the entire mining industry past some of the remaining development and adoption hurdles is a tall order,” said Jan Capek, co-founder of Braiins.

“The universal standards for running and building Stratum V2 and the efforts of this working group to drive the industry forward will provide the push Bitcoin needs to finally upgrade from a version of its mining protocol that was created a decade ago,” Capek continued.

Like the Lightning Network, which is a technology built on top of the bitcoin base layer to make payments more efficient, there will be different implementations of Stratum V2. However, the open source version released on Tuesday will make it easier to collectively test the technology. It will also ensure that the various projects can interact with each other.

Block jumping mining

Tuesday’s announcement is part of Block’s biggest push into the bitcoin mining industry.

On the sidelines of the Bitcoin 2022 conference in Miami in April, digital asset infrastructure company Blockstream and Block announced that they were beginning to build a solar and battery-powered bitcoin mine in Texas that uses Tesla solar and storage technology.

Tesla’s 3.8-megawatt solar photovoltaic array and 12-megawatt-hour Megapack will power the facility.

Block is also independently working on a project to make bitcoin mining more distributed and efficient.

The idea of ​​making the mining process more accessible has to do with more than just creating new bitcoins, according to Block hardware general manager Thomas Templeton. Instead, he says the company sees it as a long-term necessity for a fully decentralized, permissionless future.

“Mining needs to be more distributed,” Dorsey wrote in a tweet in October, when he first floated the idea. “The more decentralized this is, the more resilient the bitcoin network becomes.”

To that end, the company is solving a major barrier to entry: mining rigs are hard to find, expensive, and delivery can be unpredictable. Block says he is open to making a new ASIC, which is the specialized equipment used to mine bitcoins.

The project is being incubated within the Block hardware team, which is beginning to form a core engineering team of system, ASIC, and software designers led by Afshin Rezayee.

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