When Satoshi Nakamoto designed Bitcoin (BTC), security was based on a consensus mechanism called Proof-Of-Work (PoW). However, given the current consensus status of decentralization, Bitcoin’s security could be at risk.
At least that's the opinion of crypto researcher Chris Blec, according to a post on X on December 14th:
“That’s not a good chart. 2 mining pools (both of which force KYC on all miners) account for 55% of the Bitcoin hash rate. We could be one move away from some big problems for Bitcoin. But even worse is the fact that no one really wants to talk about it. Where’s the urgency?”
—Chris Blec
Total Bitcoin hash rate by mining pool (December 14, all chains). Source: Coin.Dance
Notably, the aforementioned chart shows Foundry USA and AntPool with 27.6% of the global Bitcoin hashrate each. Both Bitcoin mining pools are collaborations between Bitcoin mining companies that want to improve block recognition and thus their profits.
In addition to pointing out the worrying dominance of two pools in the Bitcoin consensus, Chris Blec also points out the community's lack of awareness of this issue. Interestingly, Finbold reported on September 23: “This is what centralized Bitcoin mining has become over the years.”
Why is Bitcoin mining pool centralization important?
Today, Bitcoin mining pools operate in a centralized manner in the pool coordinator. It is the coordinator who creates the block template (adding transactions from the mempool), filters unwanted transactions, detects the next block using its miner's hashrate, sends the mined block to the network, collects the mining reward and distributes it proportionally to the miners distributed.
Therefore, it is this single entity that carries out the relevant actions that directly impact the security of Bitcoin. Recently, we have seen mining pools randomly deciding not to pay their miners on certain occasions. In particular, F2Pool and AntPool – both with 8.8% and 27.6% of the global block detection rate, respectively.
In another incident, a newly created Bitcoin mining pool was also accused of intentionally filtering privacy-sensitive BTC transactions.
Essentially, these events demonstrate the importance of decentralized, pool-based consensus. Additionally, a Bitcoin Core developer explained why BTC transactions should wait two hours to be considered secure. Also affected by the current state of low decentralization.
All in all, Bitcoin’s value proposition is directly related to its security and decentralization. It is possible that the current state of the network could affect the market's perception of the value of the leading cryptocurrency.
Disclaimer: The content of this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
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