Jack Dorsey Leads $6.2M Investment in Decentralized Mining Pool OCEAN
Twitter founder Jack Dorsey has led a successful round of seed funding for OCEAN, a decentralized mining pool. Activities at AntPool highlight the need for new models.
Jack Dorsey, founder of Twitter and CEO of Block, has teamed up with several other investors to lead a round of seed funding for OCEAN, a new model of mining pool that seeks to decentralize the process, and achieved $6.2M in investment.
OCEAN is a project devised by Mummolin Inc., a Wyoming-based firm founded in 2023 by Bitcoin Core developer Luke Dashjr and others. As of yet, it’s still in its earliest stages, but many of the fundamentals were outlined on November 28, when Mummolin announced the end of the seed funding round. Essentially, OCEAN will be a fundamentally decentralized mining pool, as Dashjr described it: “The role of mining pools must change for Bitcoin to exist as a truly decentralized currency. OCEAN is a new type of pool that enables miners to be truly miners again. We are launching as the most transparent pool and also the only non-custodial pool where miners are the recipients of new block rewards directly from Bitcoin.”
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Mining pools are a fundamental part of the Bitcoin mining ecosystem in 2023, as it has become prohibitively expensive for individual miners to have any hope of making a dent into the substantial transactions needed to create and validate bitcoins. Gone are the days that a hobbyist could have any hope of earning a few on any sort of home computer setup, now even the most rudimentary systems have substantial requirements of hardware and electricity.
So, to give these smaller miners an opportunity, there are mining pools, which allow users to pool together their resources, and get a share of the subsequent bitcoins. As OCEAN’s Global Head of Sales, Bitcoin Mechanic, noted however: “Even though hashrate may be distributed globally, the reality is that the intelligent parts of mining (running a full node, sourcing transactions, constructing the block template) are performed by very few individuals and the pools that they control. This has the potential to hurt Bitcoin.” In other words, all the major pools are heavily centralized, where most of the contributors are reliant on this center to actually make payouts.
This dynamic has had a particularly interesting case study on November 30. Due to an apparent user error, an anonymous user at leading miner AntPool paid the largest ever transaction fee in Bitcoin history, 83 bitcoins worth more than $3M. Pools earn their revenue by mining new bitcoins and by validating transactions on the blockchain, and it seems as if this latter function is where the mishap took place. AntPool’s risk control system froze the transaction and the leadership has offered to give the user their money back, provided this person can validate their identity.
By all accounts, everyone involved has been approaching this difficulty in good faith and with a concern for avoiding fraud, but this highlights a dynamic with centralized mining pools in general. Bitcoin’s blockchain is built fundamentally to be trustless and decentralized, with plenty of mechanisms for automatically processing and verifying a wide range of potential activities, but interactions between the pool and its users with less leverage don’t necessarily take advantage of these features. It’s especially interesting, because the day after it happened, AntPool became the world’s largest mining pool.
One of the main goals for OCEAN is to eliminate this dynamic where a central authority controls all the bitcoin in question, and holds leverage over the miners that contribute. Co-founder Mark Artymko elucidated OCEAN’s vision thusly: “Traditional Bitcoin mining pools take exclusive custody of block rewards and transaction fees before splitting them up amongst miners. This gives them the ability to withhold payment from individual miners, whether by their own choice or by legal requirement. OCEAN’s non custodial payouts directly to miners from the block reward remove this risk and the pool's undue influence over miners.”
In other words, a fully-operational OCEAN could present a model to really revolutionize the Bitcoin mining industry. The system Mummolin is developing is fully non-custodial and transparent, paying out rewards to its contributors directly from the blockchain. OCEAN itself never holds any mined assets directly. The project’s overall goal is to re-inject some of the decentralized spirit into the Bitcoin ecosystem of 2023, which has seen massive amounts of capital flow into the space and necessarily cloister around certain large players. By centering openness and smaller players, OCEAN hopes to make Bitcoin stronger and more democratic, which also explains its early support for the Lightning Network.
The main question at the moment is how exactly Mummolin plans to organize and run this system, which it seems to be keeping relatively close to the chest at the moment. Whatever code they’re running, it seems to be enough to impress these multimillion dollar investors, however. Jack Dorsey himself claimed in the initial press release that “Our contribution to OCEAN comes out of a deep respect for their mission. I think it's a phenomenal team. I know Luke; I've interacted with him for some time, and I was inspired by the vision and most importantly the execution.” He added that “OCEAN is solving a problem for Bitcoiners that I think all of us feel - further centralization of pools and mining pools that could plague Bitcoin, and how that risks a bunch of Bitcoin attributes that we hold dear…when I see a project that is good for Bitcoin broadly, and that's also good for me and my companies personally, it becomes a simple decision for me and I'm happy to be a part of it.”
It is unclear what the broader timetable is for OCEAN, or how far-reaching it may go in the sort of “radical decentralization” its developers envision on their website. Still, with backers as successful as the project has already, it seems easy to anticipate great things from the team. OCEAN’s development will represent a real maturation for Bitcoin: new ideas and a focus on the core values, all with a great deal of confidence from the existing industry. There are plenty of opportunities for the entire community to profit from the success of OCEAN, and this round of funding is a very promising start.