Sometimes, I come across material so brilliantly explained that I find no need for further engagement other than being a pointer. This TFTC episode, in particular, falls into that category.
Dhruv's framework for better understanding mining was eye-opening for me. He proposes distinguishing between a layer zero market and a layer one market (which I have conceptualized as L1).
The objective of the layer zero market is to release Bitcoin into circulation. The participants in layer zero are the entire Bitcoin network on one side of the trade and the miners on the other. The trade is the release of the block subsidy in exchange for the computation, and the price is denominated in BTC/hash.
According to Dhruv, "mining" is a misnomer. Bitcoins are not made or found by the miners. A better way of describing the process is that the Bitcoin network sells a fixed amount of Bitcoin to the miners every 10 minutes. The difficulty adjustment is a market-making process that sets the price so that there is one bid every ten minutes on average.
The layer zero market is less complex as it does not require scripting or a mempool.
The participants of the layer one market are individuals trying to get a transaction included in a block. The mempool is part of this layer one market with an order book of several hundred megabytes.
The two markets are intricately linked, with each layer creating capabilities that the higher layer relies upon, and higher layers adding value to the lower layers. This interplay continues as one moves to higher-order layers, making the order book more complex. The order book of layer zero is one ask; at layer one, it's the size of the mempool, and at layer two, it's everything that is happening on lightning, which is in the order of a couple of gigabytes, as Ryan Gentry lays out. More and more of the data resides off-chain as one moves to higher layers.
It was well worth my time to listen through to the end of the episode.
MariusFebruary / Marius
npub18km…xwnr
2024-05-06 16:14:15
in reply to nevent1q…sxrs
Author Public Key
npub18kmu5s4gaq7qf02je6pk4xqckm5s2t5782596gkzk0r3tufpl9hs3gxwnrPublished at
2024-05-06 16:14:15Event JSON
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"content": "Sometimes, I come across material so brilliantly explained that I find no need for further engagement other than being a pointer. This TFTC episode, in particular, falls into that category.\n\nDhruv's framework for better understanding mining was eye-opening for me. He proposes distinguishing between a layer zero market and a layer one market (which I have conceptualized as L1).\n\nThe objective of the layer zero market is to release Bitcoin into circulation. The participants in layer zero are the entire Bitcoin network on one side of the trade and the miners on the other. The trade is the release of the block subsidy in exchange for the computation, and the price is denominated in BTC/hash.\n\nAccording to Dhruv, \"mining\" is a misnomer. Bitcoins are not made or found by the miners. A better way of describing the process is that the Bitcoin network sells a fixed amount of Bitcoin to the miners every 10 minutes. The difficulty adjustment is a market-making process that sets the price so that there is one bid every ten minutes on average.\nThe layer zero market is less complex as it does not require scripting or a mempool. \n\nThe participants of the layer one market are individuals trying to get a transaction included in a block. The mempool is part of this layer one market with an order book of several hundred megabytes.\n\nThe two markets are intricately linked, with each layer creating capabilities that the higher layer relies upon, and higher layers adding value to the lower layers. This interplay continues as one moves to higher-order layers, making the order book more complex. The order book of layer zero is one ask; at layer one, it's the size of the mempool, and at layer two, it's everything that is happening on lightning, which is in the order of a couple of gigabytes, as Ryan Gentry lays out. More and more of the data resides off-chain as one moves to higher layers.\n\nIt was well worth my time to listen through to the end of the episode.",
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