Key Takeaways
- Bitcoin’s decentralization principle faces challenges from increasingly centralized mining operations.
- Foundry USA, AntPool, ViaBTC, F2Pool, SpiderPool, and MARA Pool control a significant portion of Bitcoin’s hash power.
- Bitcoin mining centralization raises concerns about network security and vulnerability to collusion or external pressures.
- The future of Bitcoin mining activities may hinge on maintaining decentralization to uphold its integrity and trustworthiness.
Is Bitcoin centralized? The answer might suprise you.
Recent mining statistics reveal a troubling fact about the Bitcoin network: the vast majority of the blockchain’s hashpower is concentrated in a just a handful of colossal mining operations. And that’s a problem.
The essence of Bitcoin (and all public blockchains) is decentralization. Blockchains remain immune to bad actors, manipulation and censorship by distributing control of the network among nodes, thereby avoiding a single point of failure.
The only way to manipulate this system is via a 51% attack, in which one entity gains control over half the network’s hash power. In the case of Bitcoin, this would mean one single entity controlling 51% of the network’s hashpower. This could enable double-spending and other manipulations of the network, implicating trust in Bitcoin and undermining its value and usability.
When large groups of miners unite to act as an entity, they gain a larger share of the network’s hashpower. For example, Foundry USA is the largest Bitcoin mining pool, with thousands of individual miners all contributing. The result is that the Foundry Pool controls around 30% of Bitcoin’s overall hashpower. In fact, Foundry and the next five largest Bitcoin mining pools collecctively control 90% of Bitcoin’s computational power, a far cry from the decentralized security promised by Satoshi’s white paper.
Centralized Bitcoin mining operations casts doubt over the security of the network. When a few entities control such a significant network segment, the possibility of a a 51% attack becomes pausible.
Why is Bitcoin so centralized?
So just why is Bitcoin centralized?
Let’s start with an analogy. Jill, Joanne and James are part of a league where thousands of people compete to solve a digital Rubiks cube the fastest for a cash prize. The more computational power you have, the faster you’ll be able to solve the cube, and potentially win the prize.
But the wider community have started buying fancy equipment to enhance their speed; some have even formed groups so they can combine their power and win. A prize split between many is better than no prize, right?
Individually, Jill, Joanne and James no longer have a chance of keeping up. But they can still compete if they join forces and work as a group.
This is a similar story to what’s happening on the Bitcoin network. The energy required to minee Bitcoin has increased exponentially over time. As a result, today it is highly improbable that a solo miner can win a block (although there are exceptions such as this lucky CK Pool solo miner). Powerful mining farms with huge amounts of hash power will nearly always be able to solve the hash faster. So to be in with a chance of collecting some of the block reward, individual miners contribute their hash power to large mining pools instead.
The result? The disstribution of Bitcoin’s hash power is concentrated in the hands of a few big players.
With so much at stake, staying informed is essential. Here’s a closer look at 6 mining operations currently holding Bitcoin’s hash power reigns.
6 Mining operations dominating Bitcoin
| Name | Owned by | Hash power | % Share | |
|---|---|---|---|---|
| 1 | Foundry USA | Digital Currency Group | 150.6 EH/s | 27.14 |
| 2 | AntPool | Bitmain | 142.9 EH/s | 25.77 |
| 3 | ViaBTC | Haipo Yang | 82.6 EH/s | 14.89 |
| 4 | F2Pool | Chun Wang and Discus Fish | 66.2 EH/s | 11.93 |
| 5 | Spider Pool | Hua Chen | 21.1 EH/s | 3.8 |
| 6 | MARA Pool | Marathon Digital Holdings | 20.5 EH/s | 3.7 |
Foundry USA: Powerhouse in Bitcoin mining
Foundry USA, a Digital Currency Group subsidiary, is a major player in securing the Bitcoin network. They wield a hash rate of 150.6 EH/s and contribute 27.14% of the network’s security.
Notably, Foundry USA is a leader in the North American Bitcoin mining sector, reflecting its growing regional influence in cryptocurrency mining. They’ve earned much respect for their commitment to transparent and decentralized mining practices, essential in maintaining system fairness.
AntPool: All-in-one Shop for Bitcoin (and more) mining
Bitmain, a Chinese company, runs AntPool, a leading Bitcoin mining operations. AntPool has a hash rate of 142.9 EH/s and contributes 25.77% to the network, making it one of the biggest mining pools worldwide. AntPool, started in 2014, supports ten cryptos like Bitcoin, Bitcoin Cash, Ethereum, and Litecoin, and gives miners daily rewards based on their hash power.
AntPool’s advanced infrastructure and strategic collaborations have enabled it to maintain a competitive edge. AntPool offers an app for real-time hash rate monitoring and supports multiple earning modes like Pay Per Share (PPS), Pay Per Last N Shares (PPLNS), and Pay Per Share Plus Transaction Fee (PPS+), ensuring flexibility and efficiency for its users.
ViaBTC: Transparent and competitive Bitcoin mining
ViaBTC, founded in May 2016 by Haipo Yang, boasts a hash rate of 82.6 EH/s, accounting for 14.89% of the total Bitcoin mining power. Known for its innovative approach, ViaBTC offers a variety of mining options and supports multiple cryptocurrencies. ViaBTC’s user-friendly interface and competitive fee structure attract a diverse group of miners.
ViaBTC’s commitment to transparency and security enhances its reputation among cryptocurrency enthusiasts. As an innovation-driven blockchain service provider, it offers three payment methods: PPS+, PPLNS, and SOLO. ViaBTC’s reliable products and global user base position it as a leader cryptocurrency mining.
Here’s a summary of ViaBTC’s operations:
- Choose from PPS+, PPLNS, or SOLO mining rewards.
- Available to miners in over 130 countries.
- The pool fee varies based on your chosen payout method, typically 1-4%.
- Receive automatic daily payouts with no fees, or opt for manual withdrawals with a minimal coin-dependent commission.
- Minimun withdrawal amount depends on the coin.
- Provides occasional fee discounts with special coupons.
F2Pool: Advancing Bitcoin mining in China
F2Pool, co-founded by Chun Wang and Discus Fish, contributes 11.93% to the Bitcoin network with a hash rate of 66.2 EH/s. Established in 2013 as China’s first mining pool, F2Pool emerged in response to the introduction of ASICs, which significantly outperformed GPUs in Bitcoin mining. The pool supports a variety of cryptocurrencies and offers miners flexibility through payout schemes such as PPS, PPLNS, FPPS, and PPS+.
Here’s how F2Pool operates:
- Rewards depend on your chosen coin and payout model, PPS or PPS+. With PPS, you earn for each valid share submitted.
- Mining pool fee varies depending on the coin, typically 1% to 5%.
- Minimum payout amount depends on the specific coin.
- Payments are processed daily for your convenience.
- The pool has strong security to protect against DDoS attacks.
SpiderPool: Combining mining efficiency with sustainability
SpiderPool, led by Hua Chen, has swiftly gained prominence with a hash rate of 21.1 EH/s, representing 3.8% of the network’s hash power. Even though it’s a smaller player, SpiderPool’s fast growth and tech make it a worthy competitor in mining.
SpiderPool supports various payout models, including PPS, PPLNS, PPS+, FPPS, and SOLO, with a 2% pool fee. It covers transaction fees and pays out automatically every day. Once a week, users can apply for withdrawals below the minimum threshold.
SpiderPool emphasizes efficient mining operations and environmental sustainability, aligning with the trend of eco-friendly mining practices.
MARA Pool: Making its mark in North American mining
MARA Pool, established by Marathon Digital Holdings, Inc., contributes 20.5 EH/s to the Bitcoin network, representing 3.7% of the total hash power. As part of Marathon’s strategy to lead the North American mining industry, MARA Pool ensures a steady and significant presence in the network.
Marathon Digital Holdings, an American digital asset technology company, focuses on transparency, regulatory compliance, and sustainable mining practices. The dedication to secure Bitcoin mining underscores MARA’s role as a contributor to blockchain in North America. MARA’s ongoing initiatives continue to bolster its standing in the digital asset technology industry.
From distributed to centralized: a brief history of Bitcoin mining
Now you understand the big players slowly dominating the network, but the question remains: just why is Bitcoin centralized? To answer that, we need to look back over the evolution of the network, from its inclusive beginnings with the Bitcoin White Paper to today’s hyper-industrial mining industry.
2009: Bitcoin mining was open to anyone
When Bitcoin launched in 2009, early miners were able to mine BTC with a CPU on their computer. This enabled nearly anyone to get involved in the mining process. This cultivated a completely decentralized network of individual miners, all of whom had a chance of winning the block reward.
2010: Slushpool launched the first Bitcoin mining pool
But it didn’t take long for the mining community to see the potential of pooling resources. Proof-of-work’s competitive selection system favours powerful mining nodes, incentivizing individuals to collaborate in order to win.
Slushpool was the first Bitcoin mining pool, using a community of regular CPUs to power a single mining node. This signalled the beginning of the concentration of Bitcoin’s mining network.
2013: ASICs supercharged Bitcoin mining
Over time, mining equipment became more sophisticated, and the amount of hash power required to mine a new block steadily increased.
The first ASICs (application specific integrated circuits) hit the market in 2013, and had a profound impact on the state of the network. Built solely for mining, ASICs brought a level of efficiency that far outstripped a regular computer. By raising the level of computational power available to miners, ASICs upped the game for Bitcoin mining. But it also created a barrier to entry for miners. Now, to have any hope of profiting, miners needed expensive machines – and this reduced the number of miners in the Bitcoin network.
The future of Bitcoin mining
As Bitcoin aims to remain secure, the gradual concentration of its mining power among a few pools raises critical concerns. When a few big players control most of the hash power, it exposes the network attacks from miner collusion or outside influence.
Closely monitoring the state of the network should be part of any investor’s research, particularly as giant pools like Foundry USA and Ant Pool continuously up the ante in their battle for dominance. So stay informed
