Schwartz: Economic Nodes Can Turn Miners' ASICs into Space Heaters

David Schwartz, former CTO of Ripple, recently weighed in on the economics of Bitcoin mining. In response to a question about whether most mining nodes behave honestly, he explained that the incentives for miners are tied to the behavior of economic nodes, such as exchanges and wallets.

Nakamoto's original design relies on an honest majority, where the longest chain wins and honest nodes outpace attackers who control most of the computing power. However, Schwartz pointed out that a mining cartel would still need these economic nodes to follow along if they attempted to rewrite history.

He noted that exchanges decide which chain credits a deposit, and merchants decide which chain settles a payment. Miners earn nothing on a chain nobody values, so they are heavily incentivized to behave honestly. If they double spend, economic nodes could take action against them by forking the chain and changing the mining algorithm.

This would essentially turn expensive ASICs into 'space heaters' faster, as they would no longer be able to mine. Schwartz's argument is that this threat carries real weight, given that miners have sunk billions into their hardware.