Falling Bitcoin Price Is The Perfect Storm for Centralization Of Bitcoin Mining
The backbone of the Bitcoin network is miners and full nodes. We have already seen a decrease in the amount of full nodes over the last 24 months as Bitcoin ASIC miners came on the scene in greater numbers. Bitcoin ASIC miners brought Bitcoin mining to more people as they were lower power than GPU rigs that had been the norm for quite some time prior. As the value of Bitcoin has risen over the last two years, we have seen more and more money invested into mining from both small home miners to large farms and even huge industrial multi megawatt installations. The current price drop has put....
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For many, the level of centralization found in the Bitcoin mining ecosystem is the biggest issue for the peer-to-peer digital cash system today. As a technology that relies on decentralization in order to provide a censorship-resistant bearer ecash, any trend towards centralization should be viewed as problematic. In 2014, economist Kevin Dowd claimed the incentives of pooled mining are “totally destructive of the Bitcoin system.” The amount of mining that takes place in China led former Bitcoin developer Mike Hearn to state, “Bitcoin is controlled by the Chinese Government.” Those who....
Is a perfect storm of rising difficulty and falling bitcoin prices killing home-based hobbyist mining? Some industry experts think so. Ravi Iyengar, founder and CEO of CoinTerra, said that his company used to sell equal numbers of ASIC mining units to individual investors and institutional miners, who would buy them in larger volumes. "The ratio of small retail miners to institutional miners has gone down," said Iyengar, adding that now, fewer than 20% of the units CoinTerra sells go to people mining from home. The downturn in sales to retail miners happened over the last five months, as....
Bitcoin mining centralization - the concentration of mining power in the hands of a small number of corporate entities - is considered by many people to be the single biggest problem facing the cryptocurrency today. One of the biggest selling points of Bitcoin is, after all, the fact that it is a decentralized network that does not need to rely on users trusting large corporations, such as the 'too big to fail' banks which many would like to see replaced by cryptocurrency. Bitcoin's mining centralization not only contradicts this decentralized ethos, but also potentially puts the network....
Bitcoin mining pools rely on centralization, but P2Pool and other protocols have sought to reduce the need for trust in third parties.
If the only tool you have is a hammer, it's tempting to treat everything as a nail. Thus, most people in the technically-oriented Bitcoin community treat the specter of mining centralization as a problem to be solved chiefly by technical means. However, a substantial cause of mining centralization is Chinese government policy, which distorts the digital currency mining market. There are creative arguments that China is violating its international trade obligations. Given the consequences for mining centralization, government subsidy for digital currency mining might be added to the list of....