Concentration of mining power within the Bitcoin network is causing some anxiety, as two major mining pools now control a combined 51% of the total network hashrate.
Dominance of Foundry & AntPool in Bitcoin Mining Hashrate Raises Eyebrows
Social media user Leo Lanza recently highlighted that a significant portion of the Bitcoin network’s processing power is now concentrated in the hands of just two mining pools. The “hashrate” represents the collective computing resources dedicated to mining activities on the Bitcoin blockchain.
Bitcoin operates using a Proof-of-Work (PoW) system, where miners compete to solve complex cryptographic puzzles. The first to solve the puzzle gets to add the next block to the blockchain. The hashrate serves as an indicator of the overall computational effort miners are expending.
The following chart, sourced from Blockchain.com, illustrates the recent trend of the global Bitcoin hashrate, calculated as a 7-day average.
As demonstrated by the graph, the 7-day average Bitcoin hashrate has increased recently, approaching its record high. This suggests a surge in mining activity and investment.
While the hashrate is a consolidated measure of miner computing resources, it is important to note that PoW’s design prevents these resources from acting as a singular unit. It’s this competition that upholds the security of the Bitcoin blockchain.
The PoW consensus works best when there is sufficient decentralization. If a single miner or entity gains control of a majority of the hashrate, they could theoretically manipulate the blockchain to their benefit.
Such an attack is commonly known as a 51% attack. Alternative consensus methods, such as Proof-of-Stake (PoS), also risk being compromised by similar tactics. For instance, controlling over 51% of the staked ETH on a PoS network like Ethereum could lead to blockchain control.
Bitcoin’s substantial growth has made a 51% attack extremely difficult. However, it is not impossible. Mining pools, where individual miners join forces for improved chances of earning rewards, present a potential vulnerability to Bitcoin’s decentralized nature.
This is the reason for concern today: just two mining pools collectively command over half of the Bitcoin hashrate.
According to data from Hashrate Index, Foundary USA and AntPool currently account for 33.6% and 17.9% of the Bitcoin mining power, respectively. In total, they account for 51.5% of the global hashrate.
Despite this concentration, successfully executing an attack remains highly unlikely. These pools are comprised of individual miners, and their coordination for a takeover would be extremely difficult. Moreover, any successful attack would likely cause a collapse in the Bitcoin price, directly harming all miners involved.
BTC Price
As of this writing, Bitcoin’s price is around $113,700, reflecting a decrease of approximately 6% over the past week.
Disclaimer: This information is for general knowledge only and should not be considered financial advice. Past investment performance is not indicative of future results.