makeasnek on Nostr: This situtation is not ideal, and there are some protocol upgrades coming through the ...

This situtation is not ideal, and there are some protocol upgrades coming through the pipes which will help with this situation. But it's not as bad as it seems.

Let's get some basics out the way. Even if they collude, mining pools can't:
- Spend funds they have the private key for
- Print more Bitcoin than the protocol allows
- Do anything else to make a block which is "invalid"

Why? Because all the other nodes on the network will reject those blocks.

Mining pools also only /relay/ the results of mining to the network. They have no hashpower of their own. If a pool misbehaves, miners can switch instantly, and most major mining farms have things in place to monitor the behaviour of pools. In fact, when pools have misbehaved in the past, this exact thing has happened.

Speaking broadly, every incentive is aligned to stop mining pools from misbehaving. They will lose all their hashpower and revenue if they do. And if their attack is significant enough, they may harm Bitcoin's reputation, which devalues any coins they have and the network they rely on for income.

Let's also remember that mining pool operators are people. They are subject to the same poor judgement we all are, the same greed, the same fallibility. If there were some way for them to do a quick hit-and-run and get away with enough money to be set for life, don't you think at least one of them would have tried it by now? Or some other malicious actor would have forced their hand? And yet it hasn't happened. Because doing it makes no sense.

The danger people talk about with pools is the 51% attack. In a 51% attack you can do a "double-spend" where you send somebody BTC, get something of value in return, and then "un-spend" that BTC by rolling out a different version of the blockchain where you didn't spend that BTC.

The problem is, what is the thing you are going to get in return? It's going to have to be more valuable than the loss you will inevitably suffer for executing this attack. There are few things that valuable on earth, and moving them is not going to happen instantly. Anybody who is going to accept millions or billions of dollars of BTC is not going to do so on a single block confirmation. You need to consistently pull off a 51% attack multiple blocks in a row. The more blocks in a row you do this, the more obvious it becomes that you are doing the attack.

A pool doing a 51% attack can also delay transactions, but not censor them so long as they are not the only pool producing blocks. And if they want to censor them forever, they need to be at 51% forever which won't happen because miners will switch.