Bitcoin’s financial incentives are under pressure. Exposing a weakness in the proof-of-work algorithm has revealed a conflict of interest for the miners. Gregory Maxwell, CTO of Blockstream and bitcoin core developer, implies that one of the largest Chinese miners uses a patented technique that allows them to secretly mine more efficiently than others.

The technique Maxwell is talking about is called AsicBoost and has been known for several years. AsicBoost takes advantage of a weakness in Bitcoin’s proof-of-work algorithm, which allows a miner to find a block by performing fewer calculations than a miner without the patented technique. It is up for debate whether the technique exploits the weakness or is simply a clever optimization. Maxwell indicates that the efficiency gains as a result of applying the technique can generate up to 100 million euros per year in extra revenue, for a miner who controls 50% of the hashrate and with the technique 30% efficient nter can mine.

The party in question, Bitmain, denies that they secretly use AsicBoost and calls the allegations a blackening campaign. Bitmain’s CEO, Jihan Wu, is known as a strong opponent of Segregated Witness (SegWit) activation. Wu has long given the reason for blocking SegWit that he is in favor of Bitcoin Unlimited.

Maxwell points to a different motive: the secret application of AsicBoost is not compatible with SegWit’s proposed changes to the Bitcoin protocol. When SegWit is activated, the investment in the patent and the potential returns from its use would be lost. Bitmain has confirmed that the hardware they make and use supports AsicBoost and that they have tested the use of AsicBoost on Bitcoin’s test network, but denies active use on the main network.

The incident shows that situations are possible where the short-term financial interests of miners and long-term technical innovation of Bitcoin conflict. When the Bitcoin community ‘allows’ the use of such techniques, this can have detrimental consequences for Bitcoin’s decentralization, as control of the network becomes increasingly centralized to a single miner or patent holder. The situation gives much food for thought about the level of control miners should have over the network, and how much of the power should rest with the users.