As a seasoned crypto investor with a keen interest in the underlying technology and market dynamics of Bitcoin, I find the recent revelation of increasing centralization in Bitcoin mining quite alarming. The fact that one entity controls nearly half of the network’s hashrate from just nine major pools is a cause for concern and highlights the potential risks to Bitcoin’s decentralized nature.
BitMEX analysts, known for their expertise in cryptocurrency trading, issue a cautionary note about the growing centralization in Bitcoin mining. Approximately 47% of the Bitcoin network’s computational power is controlled by nine dominant mining pools, with one entity holding the reins.
As a researcher investigating the PoW (Proof of Work) centralization concern in the Bitcoin network, I’d like to explore the idea put forth by Mononautical and Bergealex4 that the requirement for large war chests by mining pools is contributing to this issue.
— BitMEX Research (@BitMEXResearch) April 29, 2024
Mononaut, a user on X, brought to light the fact that an unidentified figure has amassed large quantities of bitcoins from well-known mining pools such as AntPool, F2Pool, Binance Pool, among others. This individual additionally manages entry points for ULTIMUSPOOL and 1THash, and collects incentives from Luxor.
BitMEX researchers have suggested that in order to survive for a year with a decent chance of controlling half the Bitcoin network’s mining hashrate, a mining pool must maintain a large reserve of around 400 BTC. Similarly, to have a 5% control over the network’s mining power, a pool would need approximately 500 BTC in reserves.
Alex Bergeron, a cryptocurrency expert and analyst, emphasized the significant level of mining concentration within Bitcoin’s blockchain. Miners, despite experiencing income instability following the latest block reward reduction as indicated by CryptoQuant CEO Ki Young Ju, have not given up.
The ongoing advancements highlight the significant challenge Bitcoin’s decentralized philosophy faces, sparking debates about minimizing risks related to centralization in Bitcoin mining activities.
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2024-05-01 08:04