Only five companies control Bitcoin network operations

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Bitcoin’s infrastructure is more centralized than ever, sounding the alarm on the security and viability of what is defended as a decentralized network.

Transactions on the bitcoin network are handled by so-called miners – mostly companies with large ranges of computers. As the competition intensified, many small participants became unprofitable and gave up, while the larger companies entered into various partnership agreements. As a result, five mining entities – all based in China – control 49.9% of all computing power on the network, the highest concentration of mining power ever, according to a new analysis from TokenAnalyst.

The five mining entities – AntPool, BTC.com, BTC.top, F2 Pool, and ViaBTC – are available through BitDeer, which allows consumers to lease mining power without purchasing or setting up crypto-mining hardware. BitDeer effectively acts as the connective tissue between the five mining pools, each allowing individual miners to draw their resources and share the freshly minted bitcoins which serve as rewards. The problem is that a miner with more than 50% hash power can potentially wreak havoc on the network, increasing the likelihood of double counted coins, stopped payments, and blocked transactions.

Highly centralized

“Once a consumer pays BitDeer for a plan, they can assign that hash to any partnership mining pool,” TokenAnalyst said in the report released Friday. “Does it really make a difference? What prevents entities from merging into one large entity that maintains a certain degree of separation “only by having separate addresses where they receive rewards.

Bitcoin’s main attraction has always been its lack of centralization – its lack of dependence on a particular government or bank. But in recent years, the bulk of trading has become controlled by a handful of exchanges. Now, network operations also appear to have become very centralized. – Reported by Olga Kharif, with assistance from Vildana Hajric, (c) 2020 Bloomberg LP


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