Bitcoin hashrate is increasingly centralized, with some mining pools controlling the majority of blockchain mining power. The latest data from Mempool indicates that 50% of the total hashrate is held by Foundry USA and Antpool.
The mining network is highly centralized.
Casting United States has maintained a hashrate of more than 30% of the total Bitcoin network for several weeks. Canada became the first non-Chinese mining basin to take first place in November 2021, following the ban on the exploitation of bitcoins in China mid-year.
At the time, the United States foundry contributed 17% of the total bitcoin hashrate. Today, the pool based in the United States on average 34.1% of the mining power, equivalent to approximately 104 EH/s, considering that the Bitcoin hashrate is approximately 300 EH/S.
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Antpool comes in second with about 18.0% of the total hashrate equivalent to about 58 EH/s. The pool based in China used to be the largest pool of Bitcoin, but was affected by the prohibition of crypto mining which caused several miners in the region to migrate.
What accounts for this tendency?
The chart shows that more than 80 percent of Bitcoin's mining power is concentrated between just 5 pools. This is in contrast to early 2022, where these five mining basins barely surpassed 60% of the hashrate.
There may have been some contributing factors. One of which is where the servers in these pools are located. The closer the servers are to the pools and mining installations, the lower the latency of information transfer. This means that a miner will probably get more shares in the extraction process and will earn more bitcoin (btc) by logging on to a closer server.
Another factor is the financial incentives that come from these large mineral deposits. Large mineral deposits can still give profits to their members, who pay a commission for mining with their resources, which brings more miners into their ecosystem. This is evident with the high mining difficulty over the past few weeks due to the upward movement of Bitcoin, making it difficult for junior mining pools to be profitable.
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However, the highly centralized mining system of Bitcoin poses significant hazards for the cryptocurrency. Miners may be willing to reject transactions that do not respond to a specific parameter leading to a 51% attack.
We have seen such attacks happen on other proof-of-work blockchains like classic ethereum, which might be a problem for bitcoin. Moreover, these pools are reputable businesses and could face pressure from regulators trying to control activities on the Bitcoin network.
To date, Bitcoin continues its upward trend, with the world's leading cryptocurrency increasing by 40% year-to-date. As of the time of writing, Bitcoin is trading at $23,400, according to data from Tradingview.com.
Presented picture of Pixabay, Trading View graphics, Coinwarz and Mempool.