Shanghai — China
Bitcoin is a cryptocurrency based on the Blockchain technology. If you don’t know what a Blockchain is, please read my previous article.
Today, we are going to learn more about the Bitcoin’s mining pools. Theoretically, a blockchain is the most secured system because it’s decentralized, distributed and a public ledger.
So, technically, Bitcoin and the others cryptocurrencies are impossible to corrupt!
But…
Here comes the mining pools,
And their large concentration in China…
First, let’s see what mining means and what is a mining pool?
Bitcoin is based on a the blockchain system. So, to add a new transaction to the Bitcoin network, a miner creates a new block that will join a chain.
A miner is a person who helps to create a block. He or she applies a mathematical code, called a “hash function”.
Every block possesses the hash of the previous block and it’s impossible to go backward to find a transaction with the hash. It only goes one way.
That’s why Blochain is the most secured system never invented.
Mainly, contributing to the Bictoin mining is using the computing power to find the good hash. When it is found, a bloc is created.
At the beginning, mining was done by individuals at home with regular computers. But now, to reinforce the security, The Bitcoin Company makes it more difficult for individuals to find the hash functions.
“The difficulty is reset every 2016 blocks by the network and the miners have 14 days to create the bloc no matter the mining difficulty”. (cryptos.net)
This why people gather together in mining pools to increase their computing power.
Where are located the mining pool in the world?
More than 80% of the mining pools are located in China. Most of them only provide Chinese websites and support.
The others 20% are located in :
· Iceland — 5%
· Japan — 3%
· Czech Republic — 3%
· Georgia — 2%
· India — 2%
The mining pool concentration could become a major issue for the Bitcoin. The concentration is going on the opposite of the Blockchain principles :
· Decentralized
· Distributed
· Public
Do you see why the mining pool concentration is a major security and trust issue?
If someone possesses more than a half of the network computing power. He can take the control of the network and authenticate every transactions of his choice. It’s even possible to imagine that one could use several times the same bitcoins.
In that scenario, the whole system would be corrupted and untrustworthy.
However, Four of the biggest chinese mining pools possess more than the half of the global Bitcoin mining power.
1. BTC.com — 27%
2. Antpool — 15.5%
3. BTC.top — 11.2%
4. ViaBTC — 11.5%
Source : Blockchain.info
So, if there is an alliance or an agreement between those four companies, it will become a country risk that can alter the trust in the Blockchain Transaction system.
For the anecdote, Slush Pool, from Czech Republic was the first Bitcoin mining pool.
And BitFury, from Georgia, is the cheapest one. They take 0% fees.
Source : buybitcoinworldwide.com
To resume, Bitcoin is actually facing a major systemic situation with the mining pools concentration.
How will they overcome this situation and how will they secure their system to maintain the reliability and the trust of the market?
If you have the answer or some ideas about it, do not hesitate to share it in the comments below.
Thank you for reading. I hope you learn something new about Bitcoin.
If you like it, share it with your friends.
Always be clappin’