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Today, the days of hobbyist encryption miners are long gone, and thanks to the growth of larger miners (ie Bitmain) we can enjoy a more reliable, stable and fast network. However, this has a price. Over 90% of the total power of the hash bitcoin is owned by less than 20 companies.
Satoshi designed an almost perfectly balanced and untrustworthy system to prevent unauthorized actors from taking control. The labor-testing mechanism (PoW) is at the center of this system and drives the growth of the decentralized network by rewarding participants who provide computing power. This makes the network more stable and secure and is also known as "mining".
But the creator of Bitcoin underestimated the implications of PoW and that the development of ASIC hardware could lead to the centralization of power in the hands of a few players, ultimately represents a significant threat to decentralized networks.
As the Bitcoin network began to grow rapidly, demand for computing power also increased, and eventually PoW led to strong competition among participants, making it increasingly difficult for smaller miners to remain relevant and profitable. This trend has been further exacerbated by the increase in cryptocurrency prices. With the involvement of more and more serious companies, the competition has become a race to create better, faster and more efficient mining equipment.
Bitmain: Monopoly and risk of a 51% attack
Bitmain is the clear winner of the mining race, the Chinese company has earned 2.5 billion dollars in turnover in 2017. Bitmain's products are superior, the their ASIC miners require less energy and achieve higher hash rates, resulting in higher profits. It is no surprise that experienced miners, mostly motivated by profit, have opted for the equipment that achieves maximum return on investment. Bitmain's hardware business combined with ownership of the world's largest mining pools has given Bitmain the power to effectively influence and control the Bitcoin network.
One of the consequences of this domain is the centralization of the network, which makes the Bitmain itself the biggest threat to the network. As recently highlighted by Vitalik at a conference in Zug, Bitmain controls almost 53% of the ishrate, which poses a serious risk of a 51% attack. Although it is unlikely that such an attack comes from Bitmain because it would destroy their business model, it is still an unacceptable situation if Bitcoin won the trust of the wider community.
The Bitcoin network experienced a similar situation in 2014 when the Ghash.IO mining pool reached a hashrate of close to 51%. Ghash.IO then made a voluntary declaration, promising that it will not exceed 39.99% of the total Bitcoin hashrate. The team also encouraged other pools to follow the example for the benefit of the entire community.
New hardware and pool vendors of alternative mines
Although Bitmain is likely to continue to dominate, we have already observed strong moves by competitors to challenge Bitmain's position. The Innosilicon A9 ZMaster has a hashrate of 50ksol / s, beating the Bitmain Antminer Z9 at 50 ksol / s and reaching a profitability of $ 83.10 / day against $ 65.47 / day of Bitmain Antminer Z9 (at the time of drafting of this article).
The selection of smaller mining pools, outside of the influence of Bitmain, may be another way to reject centralization and potentially evil intentions. For this to happen, the miners will have to work together to establish alliances and shift their hashing power to alternative mining pools or start their own pools. This is in line with the spirit of the values of the decentralized world, which will hopefully be deeply rooted, at least among some crypto-miners.
Potentially considered idealistic or old-school, GPU mining is still a viable option and can be profitable with the right configuration. The creation of mining platforms that can extract any cryptocurrency, including ASIC-resistant coins, is generally good practice.
The Future is Decentralized
Bitmain has actually helped to create a stable and safer blockchain that offers with determination and speed. However, what once meant that security is turning into the biggest threat to the Bitcoin network so far. It is now crucial for the community to work together to reduce Bitmain's position in an attempt to create a fair and decentralized system that benefits the community as a whole, without the risk of centralization.
[Note:thisarticlehasbeenauthoredbytheauthorhostedLukeSzkudlarekDigitalStrategyLeadeFoundingPartnerWhatDigitalLukehatrollechanneldevelopmentnationalexperienceintranslateditaliandevelopmentofexperiencesandbusinessmarketingintheworldUnitedUnitPoland and Zurich. Now Luke leads the growth hacking strategies for ICO projects at What.digital, Luke has helped raise over $ 50 million through a series of ICO projects. Luke is active on the Swiss startup scene, member of the Swiss Finance + Technology Association.]
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