We are announcing today, that we committing to the Blockchain Defensive Patent License, meaning the AsicBoost patent will be available under these terms once the PCT patent has been granted. We would like to share the thought process that has lead us to this decision.
AsicBoost is an innovation that allows more energy efficiency when grinding SHA256 based proof-of-work used in Bitcoin mining. There are two forms of AsicBoost, one that provides optimizations by manipulating the merkle tree, and the other way which ultimately uses two bits from the nVersion field. The merkle method is also known as “covert AsicBoost” because it is difficult to detect. This method has received a lot of bad publicity in recent times because the method is easier to perform with low transaction count, and thus, smaller or empty blocks. Some variants of this merkle grinding also interfere with so called coinbase commitment schemes which negatively impacts protocol changes on Bitcoin.
We have strong reason to believe that some manufacturers of mining equipment have been secretly using this covert method to evade detection by the patent holder and gain unfair advantage over others but not revealing what they were doing, and without making it known to the patent holders.
Conversely, version-rolling method of AsicBoost is completely transparent in the blockheader of each boosted Bitcoin block. The method has no negative side-effects, like encouraging miners to mine less transactions and thus smaller blocks.
A feature of Bitcoin is permissionless participation, and patents are a genuine concern to the Bitcoin community if wielded in a way to stifle competition. This could have a centralizing effect on the protocol and mining, and ultimately impact the security and guarantees afforded by decentralization.
There are a number of what we consider, dangerous patents, in the mining space, which could be used to suppress mining competition. Hardware patents are a particular concern because they are agnostic to POW algorithm changes. At the time of writing, the largest mining manufacturer is using a hardware patent against a competing mining manufacturer. While the patent is considered prior art by most, it is a granted patent, and thus backed by state enforcement. We believe this sets a dangerous precedent and could escalate in the future. The patent concerned can be considered an essential patent because it governs how power is efficiently distributed on hash cards (the board which host the mining chips).
Defensive Licensing schemes aim to incentivize patent holders to pool their patents in such a way to create a disincentive for patent aggressors. The most famous is the Defensive Patent License. However, on closer investigation, it appears the license scheme is wanting when applied to blockchain technology that required strong guarantees of decentralization. A fantastic analysis was made by BitMEX Research Labs in a recent publication.
We believe AsicBoost is such an important an innovative patent that, if licensed defensively, can become a force for good to protect decentralization in Bitcoin. At this point, it is clear that covert AsicBoost does not serve the interests of Bitcoin due to the negative incentives outlined, however, version-rolling AsicBoost has none of these drawbacks, and is additionally more efficient than covert merkle grinding. No matter how efficient a mining machine is made at hardware level, version-rolling AsicBoost will always deliver more efficiency when done correctly. If this method of version-rolling is used by a large portion of the hash-rate, there may be no escaping the need for all mining equipment manufacturers to use it to remain competitive.
As such, today, we are offering the AsicBoost patent under the Blockchain Defensive Patent License in the hope that it will both discourage patent aggression in the mining space and encourage others to join the licensing regime. This will create a powerful patent pool and protect the interests of Bitcoin, which is in the best long-term interest of everyone in the ecosystem.
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