The two largest bitcoin pools, Foundry USA and Antpool, collectively mine just over 50% of the blocks on the network (this happened in July, for example). So is the decentralization of the Bitcoin network at risk?
Foundry USA and Antpool are the leaders in the BTC mining market
A year ago, Foundry USA had a 29% share of the BTC mining market, while Antpool had 25%. Three years ago, the former only had 24%, while Antpool had 20%. You can see how both are gaining in importance. Foundry USA has a hashrate of 181 EH/s, while Antpool has 140 EH/s.
The Bitcoin network is supposed to be decentralized. And it is. However, looking at the above data, one may wonder whether this decentralization is not threatened. I asked Michał Stryjewski from Unlimited, a company that trades in BTC miners, for his opinion on the matter.
The current situation, where two companies control more than half of the computing power of the Bitcoin network, is worrying because it threatens decentralization. Too much power in the hands of a few entities could theoretically lead to a 51% attack, which could allow manipulation of transactions, such as double-spending.
– warns the expert.
However, he also immediately reassures us, pointing out that “carrying out such an attack is unlikely in reality, because it would destroy trust in Bitcoin (as an entire project), which would lower its value and would also harm those who carried out the attack.”
In practice, such an attack is more of a threat to the image and decentralization of the network than a real prospect.
– he adds.
Bitcoin Network Decentralization – The Problem Is There, But It’s About Something Else
The problem is real, though. It’s just that it doesn’t strictly concern decentralization and the image of BTC.
For those with multiple mining rigs, a situation where two companies control the majority of the hashrate could mean a decrease in profitability and the risk of a drop in the price of bitcoin, which would also result in decreasing revenue while maintaining constant or even increasing energy consumption costs.
– Stryjewski points to another threat.
But what is the root of the problem? It is that “large companies have greater access to cheap energy and advanced equipment, making it harder for smaller miners to compete for block mining rewards.”
This reduces the chance of finding a block quickly, which can lead to a longer payback period.
– adds the founder of Unlimited.
As a result, smaller miners may be forced to join larger pools, and the situation only worsens. Companies like Antpool, run by Bitmain, can afford to lower mining fees due to their own hardware production, cheap renewable energy, and popularity and trust among miners, while smaller pools are more expensive, often have complicated payouts, and job stability leaves much to be desired.
– he said in a conversation with me.
As you can see, the current situation does not pose a threat to Bitcoin as a broader project. However, it does generate business risks for smaller companies mining the main cryptocurrency.
