I also am thinking along the lines of the last three posts and I also still want to reply to CoinHoarder's post upthread.

But before I respond to your 4 posts, I want to first discuss what are the real threats or problems with pools, because I think analysing this helps to understand how my idea for improving Bitcoin might play right into the theme of your 4 posts. Thus it does appear we are making some progress on mutual understanding. Thank you for the very thoughtful discussion.

Afaics the biggest flaw of pooled mining is that there is always an economic incentive to mine with a pool (in Satoshi's design) that has a double-digit percentage of the network hash rate, because otherwise revenue for miners declines (in scenarios). This is fundamental mathematics. Miners can in theory move their hashrate away from pools who are doing malfeasance, but it remains that 50% of the hashrate will always be concentrated into roughly less than a dozen or so pools. Thus pools are an easy target for government regulation and takeover control of the mining of Bitcoin. Or the natural mathematical tendency is for pools to form an oligarchy.

But more than that is that miners aren't users. They are people who invest in specialized hardware for a return on the investment. Thus their interests are not aligned to the interests of permissionless commerce economically (even though it might be ideologically, the fact is that over time mining will concentrate to those who maximize economic return from mining). Thus miners really don't have an incentive to fight government takeover. They will acquiesce because economically (mathematically) they must.

Whereas if users were the ones submitting at least 50% of the proof-of-work (and not doing so for profit but because they must with every transaction), then in theory their interests are aligned with permission less commerce so one would hope they would move away from pools that are doing malfeasance. But even then we know most of the masses are apathetic and clueless (e.g. will let Coinbase, MtGox, and Cryptsy store their coins), and thus they could maybe still be fooled, but at least then the issue isn't economically doomed but rather an education issue.

Also it can also be possible that the smartest minority forks away from the dumb masses and any malfeasance they might be doing on destroying permissionless commerce. For example, supporting Lightning Networks is dumb as shit if you want permissionless commerce because it can only work reasonably smoothly if run by an oligarchy of corporate providers. If the economics doesn't always drive the same failure again after forking away from the dumb masses, then perhaps my thread from 2013 No Money Exists Without the Majority can be proven incorrect.

So I am contemplating that the real threat to permissionless commerce are fundamental problems with Satoshi's design that would make forking away from it mathematically implausible:


Iota has attempted to go down this route and eliminated pools and mining for profit. But as I said, I think they introduced a Byzantine fault.