NTP-7: The End of Mining - PoW

Status: PUBLISHED
Authors: Danthur Lice
Date of Creation: 2025-05-29
Date of Publication: 2025-05-29
License: NCL-11

1. Scope

This document initiates a series of technical refutations produced under the Norsh architecture, aimed at critically revisiting entrenched assumptions in blockchain system design. The focus here is the concept of mining, specifically its use as a consensus mechanism, block validation strategy, and monetary issuance policy in public blockchains. The paper does not dispute the underlying mathematics of hashing but questions the operational applicability, efficiency, regulatory burden, and governance shortcomings of mining. It supports an alternative approach centered on verifiability and operational accountability.

2. Normative Principles

Mining, especially in the form of Proof-of-Work (PoW), was introduced to enable trustless validation through computational effort. However, the operational reality of modern systems demands technical models that comply with traceability, legal enforcement, and predictable issuance. This document argues that mining is inadequate for those purposes.

3. Preconditions and Scope Constraints

This paper applies exclusively to mining as a validation and issuance mechanism. It does not critique the use of hash functions for data integrity or cryptographic anchoring. All references to “mining” herein relate to computational difficulty as a condition for transaction legitimacy or block finality.

4. Technical Critique of Mining as a Model

4.1 Artificial Difficulty as Monetary Policy

Proof-of-Work enforces artificial scarcity through computational difficulty. This is not a technical necessity of validation but a design decision to slow issuance. In systems like Bitcoin, difficulty is recalibrated to maintain block intervals, introducing high energy cost without providing additional verifiability.

This design externalizes the cost of monetary control into energy consumption and hardware waste. What should be a deterministic monetary function becomes an adversarial race of computing power.

4.2 Absolute Anonymity and Illicit Flows

Anyone can mine in PoW networks, with no verification of identity or jurisdiction. This permits:

Laundering of newly generated digital assets

Indirect funding of extremist groups

Participation from entities in sanctioned jurisdictions

Unvetted flows of capital with no compliance verification

The model lacks any mechanism for Know Your Customer (KYC), Anti-Money Laundering (AML), or traceable accountability.

4.3 Concentration via Industrial Farms

Mining power naturally centralizes in industrial farms. These farms operate in regions with low electricity costs, often beyond legal oversight, and form parallel financial hubs with zero disclosure obligations. The resulting concentration invalidates the decentralization principle used to justify PoW.

4.4 Infrastructure Misuse and Informal Exploitation

Evidence shows mining activities using:

Public school or university infrastructure

Corporate servers during idle cycles

Third-party cloud accounts incurring unauthorized costs

Power diverted from public facilities

In some cases, minors participate in mining without oversight or fiscal registration, introducing risks of unregulated labor and economic informality.

4.5 Legal Exposure from Invisible Ties

If party A mines and transmits rewards to party B, a legal link may be implied, even without a formal agreement. This can lead to retroactive classifications such as:

Informal employment

Unregistered service provision

Undeclared business partnership

This exposure creates audit and liability risks for businesses interacting with anonymous or undeclared mining participants.

5. Refutation Summary

The mining model is structurally incompatible with environments that require legal observability, deterministic issuance, and operational accountability. Its key technical and governance failures include:

Computational scarcity as a proxy for monetary control

Untraceable participation of malicious or sanctioned actors

Centralization of computing power through industrial concentration

Exploitation of public or unauthorized infrastructure

Emergence of legal liabilities through opaque transactional relationships

6. Validation Under KYM: A Compliance-Oriented Practice

The Norsh ecosystem does not implement anonymous mining. Instead, it operates through pre-identified and auditable actors, governed under a compliance-aware framework. This model aligns with the principle of KYM (Know Your Miner), a term borrowed by analogy from KYC.

KYM is not a protocol or algorithm. It is a practice of identity verification and operational transparency applied to entities performing block validation or token issuance. Such entities may include:

Accredited private operators

Financial institutions

Individual actors with legal registration

Registered NGOs or foundations serving public interest causes

All such operators are subject to cryptographic traceability and, when required, public or institutional audit.

The replacement of anonymity by verified roles reduces systemic risk, improves legal alignment, and guarantees that all emission and validation flows are subject to control and accountability.

7. Conclusion

Mining is not invalid due to mathematical flaws but because of its social, legal, and economic architecture. Its incentives and lack of governance create vectors for abuse, inefficiency, and destabilization. In systems designed for public accountability, traceability, and operational ethics, it becomes untenable.

KYM offers a clear inversion of the model. Instead of enforcing scarcity through energy waste, it introduces responsibility through identity. Instead of random reward, it requires observable action. Instead of opacity, it enforces structure.

Mining, like uranium, is not dangerous by nature. It can power a city or level it. What defines its outcome is the architecture surrounding its use. The problem is not the existence of mining. The problem is its current application.

NTP-7: The End of Mining - PoW

1. Scope#

2. Normative Principles#

3. Preconditions and Scope Constraints#

4. Technical Critique of Mining as a Model#

4.1 Artificial Difficulty as Monetary Policy#

4.2 Absolute Anonymity and Illicit Flows#

4.3 Concentration via Industrial Farms#

4.4 Infrastructure Misuse and Informal Exploitation#

4.5 Legal Exposure from Invisible Ties#

5. Refutation Summary#

6. Validation Under KYM: A Compliance-Oriented Practice#

7. Conclusion#