Bitcoin hashrate is becoming highly centralized, with a few mining pools controlling most of the blockchain mining power. The latest data from Mempool indicates that 50% of the total hashrate is held by Foundry USA and Antpool.
A Highly Centralized Mining Network
Foundry USA has maintained a hashrate of over 30% of the total Bitcoin network for several weeks. It became the first mining pool of non-Chinese origin to lead the list in November 2021, following the ban on Bitcoin mining in China in the middle of the same year.
Back then, Foundry USA contributed 17% of the total Bitcoin hashrate. Today, the US-based pool averages 34.1% of the mining power, equivalent to about 104 EH/s, considering that the Bitcoin hashrate is around 300 EH/S.
Antpool comes in second with about 18.0% of the total hashrate equivalent to about 58 EH/s. The Chinese-based pool used to be the largest Bitcoin pool but was affected by the ban on crypto mining which caused several miners in the region to migrate.
What Is Behind This Trend?
The graph shows that over 80% of Bitcoin’s mining power is concentrated among just 5 pools. This contrasts with the beginning of 2022, when these five mining pools barely exceeded 60% of the hashrate.
Some factors could have contributed to this rise. One of which is the location of the servers of the said pools. The closer the servers are to the pools and mining facilities, the lower the information transfer latency. This means that a miner will likely get more shares in the mining process and earn more Bitcoin (BTC) by connecting to a closer server.
Another factor is the financial incentives offered by these major mining pools. Bigger mining pools can consistently distribute profits to their members, who pay a commission for mining with their resources, driving more miners to their ecosystem. This is evident with the high mining difficulty in recent weeks due to the bullish movement of Bitcoin, making it difficult for smaller mining pools to be profitable.
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However, Bitcoin’s highly centralized mining system poses significant dangers to the cryptocurrency. The miners could agree to reject transactions that do not meet a specific parameter leading to a 51% attack.
We’ve seen such attacks occur on other Proof-of-Work blockchains like Ethereum Classic, which could be a problem for Bitcoin. In addition, these pools are recognized companies and could face pressures from regulatory agencies trying to control activities on the Bitcoin network.
So far, Bitcoin is still maintaining its bullish trend, with the leading cryptocurrency up by 40% since the start of the year. As of the time of writing, Bitcoin is trading at $23,400, according to data from Tradingview.com.
Featured image from Pixabay, charts from Trading View, Coinwarz, and Mempool