Seven of the biggest names in Bitcoin mining just agreed to sit at the same table. AntPool, Block Inc., F2Pool, Foundry, MARA Foundation, SpiderPool, and DMND have all joined the working group of Stratum V2, a collaborative effort to revamp the communication protocol that mining pools use to connect miners.
What Stratum V2 changes
Since 2012, Bitcoin mining pools have communicated with miners using a protocol called Stratum V1. The problem is that the V1 was made in a different era, and it shows.
The Stratum V1 transmits information in garbled audio, meaning it is vulnerable to eavesdropping and manipulation. Most importantly, V1 gives mining pool operators full control over the creation of block templates. In English: the pool decides which transactions go into the block, not the miners who support the hashpower.
Stratum V2 reverses several of those changes. The advanced protocol introduces end-to-end encryption, more efficient fleet management, and, more importantly, the ability for miners to create their own templates.
The working group itself was founded in 2022 by Brains and Spiral, Block Inc.’s Bitcoin Development arm, with the goal of creating an open standard for vendors. The addition of seven major pools transforms it from a basic product into something more like a corporate partnership.
The numbers behind the upgrade
Beyond the governance implications, there is the financial crisis of Stratum V2. Reducing protocol latency and improving data management can translate to up to 7.4% higher profits for miners, according to the Stratum V2 project.
Pools entering the active pool represent hashrates. AntPool and F2Pool alone account for about 25-35% of Bitcoin mining worldwide. Add Foundry, which has always been one of the largest pools with hashrate, including the MARA Foundation (the mining arm associated with Marathon Digital), and you are looking at a working group that represents an important part of all the computational power of Bitcoin.
Why is this important to Bitcoin’s design?
Stratum V2 does not eliminate mining pools. It reorganizes the relationship between pools and their members. Miners can still benefit from a shared economy while still having the ability to create their own blocks. The pool handles the distribution of prizes. A miner takes care of making decisions.
The fact that Block Inc. it is involved is known for some reason. Block’s Spiral was one of the founders of the working class. Block also makes Bitcoin mining hardware, giving it a direct way to integrate Stratum V2 support at the chip level.
What does this mean for investors?
For investors in publicly traded mining companies such as Marathon Digital (whose MARA Foundation joined the working group), the Stratum V2 update represents a potential gain. A profit improvement of 7.4%, if it happens, would affect the margins in a business where the difference between profit and loss usually comes down to a few percentage points in terms of energy costs and operations.
