As per the finding of this research, it was concluded that Bitcoin was less centralized compared it to its peers, Ethereum and Bitcoin Cash. Long hash research was trying to look at Bitcoin’s recent mining pool and was comparing it to those of two other major cryptocurrencies, Bitcoin Cash and Ethereum.
Ethermine and SparkPool_3, control more than 50% of the total Ethereum network hash rate
According to the research put forward by LongHash, Ethereum too now has two miners that control over 50% of Ethereum hash rate. While XRP is always blamed of being a centralized token, mining pools with strong hash rates seem to be making a lot of other top coins fall under that category.
For Ethereum, while there are quite a few different mining pools, just two of them, Ethermine and SparkPool_3, controlled more than 50% of the total network hash rate.
The findings found Bitcoin Cash to be even less decentralized. The top two pools for Bitcoin Cash, BTC.TOP and BTC.com, were found controlling more than 53% of the total hash rate.
Comparing this with Bitcoin, only 29% of hash rate was in the hands the top two mining pools which happen to be BTC.com and Antpool. It was surprising to Bitcoin slowly getting more decentralized as back in June 2018, BTC.com and Antpool managed 41% of Bitcoin’s total hash rate. At that rate, a lot of analysts and investors had pointed out this high hash rate control was a point of concern because the two pools are owned by the same company (Bitmain). This meant that a single entity was close to controlling 51% of the network’s hashing power.
Also, it is well observed that in just the last 6 months, Bitmain’s mining pools have lost 28% of their market share, marking a shift toward greater decentralization of BTC mining.
This analysis holds significance as on proof-of-work blockchains, a pool or a company that commands a 51% hash rate gets the power to confirm a false transaction. This authority that culminates into a possible attack has a very negative impact on the value of the token
In the early days of Bitcoin’s growth, mining was more distributed. As digital currency continued to grow, mining became more lucrative hash rates stated increasingly concentrated in the hands of several large mining pools. Although the turbulent nature of the industry has confirmed that even the larger mining pools have a hard time holding on to their power.
Will this centralized nature of mining pools ease out as cryptocurrencies mature? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.