Ever wondered how Bitcoin is generated? Do they just float in the air and the people that are lucky enough can just snatch them and keep them? Well, that’s far from it. Bitcoin is generated through a complex process known as mining, which can be done by private individuals or companies.
One of the major Bitcoin mining pools currently making waves is Bitmain which is a China-based industry giant that recently accounts for over 40% of the overall Bitcoin hashrate. Why is it making waves? Well, because it has raised some new concerns about the centralization of mining.
How Is The Chinese Media Taking This?
Of recent, there has been a substantial amount of speculations by the Chinese media, all thanks to Bitmain and the large amount of Bitcoin hashrate being controlled by the company. One of the theories being raised is that China wants to take control of bitcoin, which raises an urgent need to modify the Proof-of-work (POW) algorithm. The million dollar question now is, “Is this a serious problem, or not?
What Dangers Does This Pose To The Bitcoin Network?
Data retrieved from CoinDance show that two bitcoin mining pools, Antpool and BTC.com, respectively have 16.5% and 25.5% of the total bitcoin blocks developed in over the past one week.
The funny part is that these mining pools are both owned by Bitmain which is also the world’s biggest producer of ASIC (Application-Specific Integrated Circuit) miners. From the figures from the data, Bitmain now has a major control over at least 42% of the entire Bitcoin hashrate. Combined, these mining pools are also in charge of 21.3% of the total Bitcoin Cash hashrate that functions using the same algorithm as Bitcoin, which is SHA-256.
With the rate at which this is going, it seems Bitmain is dangerously almost taking control of 51% of the total Bitcoin hashrate. And this, theoretically, would give it the power to make a 51% effort at attacking the network. That’s quite risky because the world of cryptocurrencies has recently witnessed a couple of successful attacks against smaller altcoins like Monacoin, Litecoin Cash, Verge, and Bitcoin Gold.
Yes, there is a far less financial incentive for attacking a cryptocurrency like Bitcoin, but there is still a little bit of concern in the community that Bitmain might someday decide to initiate a mischievous attack on the network either ways. Though this is very unlikely, however bitcoin critics feel that for it to be a matter of discussion means the level of centralization in bitcoin mining is quite high.
Apparently, the 51% threshold has once been crossed briefly in 2014 by a now-obsolete mining pool known as Ghash. However, as a result of concerns from the community, users were encouraged to divert some of their hashpower to other pools will lesser percentages. But with Bitmain, it doesn’t look like that is going to happen.
One of the things that gave this away is the fact that, recently, Antpool started a promotion that has no fee attached and will continue up until mid-September, all with the aim of attracting more miners to its platform. Also, the promotion has clearly listed bitcoin as one of the cryptocurrencies exempted from fees, even though the pools supports quite a number of mining algorithms. Fishy, isn’t it?
Is There A Way Out?
Thankfully, there is! One of the effective ways of preventing a malicious attack against the network is to create a limit to the amount of computing power that is being deployed to China, and also continue to increase the whole bitcoin network computing power. This way the cost of attacking the network will also continue to rise.
That’s not all! Concerns regarding the centralization of hashrate have inspired the development of a draft proposal aimed at decentralizing Bitcoin mining known as BetterHash. Matt Corrello, the brains behind BetterHash, advocates for taking the current bitcoin mining protocol, known as Stratum, and replacing it with two newly developed protocols. This gives individuals room to develop their own block templates instead of being forced to have to use the ones made by the operators of the pools.
Also, these newly implemented protocols will cause a reduction in the rate at which operators of malicious mining use their power to attack the network.
If many other countries actively involved in bitcoin mining do not step up their game, China will sooner or later control more than 80 percent of bitcoin hashing power. That’s a whole lot of power to let a country control!