In today's booming trend of digital currency, Bitcoin has always occupied a pivotal position. However, with the passage of time, the problem of Bitcoin mining centralization has gradually become prominent and has shown an increasingly serious trend. This phenomenon has caused people to worry about and think about the future development direction. This article will explore the causes, impacts and possible solutions of the trend of Bitcoin mining centralization in depth, and lead readers to explore new paths for the development of Bitcoin.

 The root of Bitcoin mining centralization

The root of the problem of Bitcoin mining centralization can be traced back to many factors such as mining difficulty and uneven resource allocation. As the market value of Bitcoin continues to rise, the difficulty of mining has gradually increased, resulting in higher thresholds and greater competitive pressure for ordinary miners. At the same time, a few large mining farms have gradually monopolized the market share with their financial strength and technical advantages, causing the computing power of the entire Bitcoin network to gradually concentrate on a few mining farms. This trend of centralization not only exacerbates the unfairness of the market, but also poses a threat to the security and stability of the Bitcoin network.

 The impact of Bitcoin mining centralization

The centralization of Bitcoin mining not only affects fair competition in the market, but also has a profound impact on the development of the entire digital currency field. First, centralization makes the Bitcoin network vulnerable to attacks and manipulation. Once a few mining farms have problems, the entire network may be paralyzed. Second, centralization has also increased the volatility of the digital currency market, making it difficult for investors to predict market trends and increasing investment risks. In addition, centralization has also exacerbated financial instability in the digital currency field and may trigger a wider financial crisis.

 Measures to deal with the centralization of Bitcoin mining

In response to the problem of centralization of Bitcoin mining, the community and experts have proposed a series of solutions. First, technical means such as increasing the difficulty of mining and optimizing the consensus mechanism can be used to slow down the trend of centralization. Second, policies and regulations can be promoted to limit the monopoly of large mining farms and promote fair competition in the market. In addition, more individual miners can be encouraged to participate in mining activities to achieve the decentralization of computing power, thereby reducing the risk and volatility of the network.

 Future prospects for Bitcoin development

Against the background of the increasingly prominent problem of Bitcoin mining centralization, it is particularly important to explore the future development direction of Bitcoin. Only through effective supervision and technological innovation can the healthy development and long-term stability of the Bitcoin network be achieved. In the future, we expect to see the Bitcoin network become more decentralized, more secure and more stable, injecting new vitality and momentum into the global digital currency market.

The problem of Bitcoin mining centralization is a difficult problem that needs to be solved in the current digital currency field, which requires the joint efforts and wisdom of the whole society. Only through cooperation and innovation can the sustainable development of the Bitcoin network be achieved, laying a solid foundation for the future of the global financial system. Let us work together to create a new era of digital currency!

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In the Bitcoin (BTC) mining process,
it is what distinguishes the peer-to-peer digital cash system from other forms of online payments. Instead of a centralized third party processing transactions, Bitcoin uses many dynamic, anonymous entities to transfer funds on the network.

It is based on this trusted third party transfer that allows Bitcoin to operate in a permissionless, uncontrollable and uncensorable manner. All of Bitcoin's differentiated use cases are built on this basic function.

The use of proof of work (PoW) to solve the double spending problem was Satoshi Nakamoto's major breakthrough in Bitcoin, but it is often seen as one of the weakest points in the system that is most vulnerable to attack.

Whoever controls 51% of the computing power in the Bitcoin network can choose which transactions are processed; whoever controls most of the network's hashrate can also reorganize the history of network transactions.

That said, it is not an easy task to obtain such a large proportion of the network's hashrate, as the current network hashrate is estimated to be about 70 million Terahashes per second.

One economist said that the best way to kill Bitcoin is to compete with it in order to solve the difficulties associated with shutting down or regulating the Bitcoin network. Abra CEO Bill
Barhydt also noted that banning Bitcoin trading may be difficult from a legal perspective, at least in the United States.

At the Bitcoin 2019 conference in San Francisco last month, Marco
Streng, CEO of the largest Bitcoin cloud mining company Genesis Mining and a veteran of the Bitcoin mining industry, claimed that he was very shocked by the current level of centralization in Bitcoin mining. That said, this problem may soon be solved through an upgrade of the Bitcoin mining protocol.

The warning signs of Bitcoin mining centralization

At the Bitcoin 2019 conference, Streng, who was on the Bitcoin Mining Future Panel, made it clear that he does not think the current level of centralization in Bitcoin mining is acceptable.

"I think it's actually very concerning!" Streng said.

"It's very good that we talk about this issue because what we see is a radical, innate drive that basically stems from the competitive advantage that large mining operators have over home miners."

While Satoshi's original vision for the mining process considered the concept of each computer casting one vote, this optimistic vision has long been abandoned in Bitcoin's mining history. By 2012, hardware built for the purpose of mining bitcoin had been developed, and bitcoin mining was moving toward professionalization and industrialization.

As Streng pointed out on the panel, it was economies of scale. The cheapest electricity in the world and optimizations made by the largest players at the hardware level made it difficult for the average amateur with a few mining machines in a basement to compete.

Corallo, another panelist, disagreed with Streng's concerns. Corallo acknowledged that miners could gain an advantage by having access to the cheapest electricity in the world, but he also pointed out that large blocks of cheap electricity, 10 to 100 megawatts, are in limited supply, and these setups don't necessarily account for a large portion of the total network hashrate.

"When you look at mining itself, it's still a relatively decentralized system... When you look at mining itself, there are hundreds of players, but not all of them have more than one or two network hashrates at a time, and in absolute terms, five at the most," Corallo explained.

A New Bitcoin Mining Protocol

Based on this problem, Braiins CEO Janapek announced a redesigned mining protocol last week as part of a new, open, and transparent bitcoin mining stack.

This new mining protocol, Stratum
v2, allows individual miners (rather than mining pool operators) to choose which transactions go into the mined blocks. Mining pools have a much worse level of centralization than the actual miners, so moving the process of selecting transactions from pools to individual miners should be a boon for decentralization.

Stratum v2 includes various security improvements for miners, and a Braiins spokesperson said in a comment:

“This is exactly why we invite the entire community to participate. We propose Stratum
v2 to address all the pitfalls of the current protocol, so there is no reason for the network not to follow this. Large miners may push for the implementation of the new protocol, and having a more efficient security protocol and optionally allowing the use of telemetry data is definitely one of the key motivations.”

In terms of potential obstacles facing the new mining protocol, the volatility of Bitcoin’s price may change the short-term priorities of miners. In addition, manufacturers of Bitcoin mining equipment need to adopt the new binary protocol included in the stack.

“Hand in hand with the protocol initiative, we are also planning to upgrade our open source mining firmware (Braiins OS) to provide first-class support for the protocol and accelerate the process,” said a Braiins spokesperson.

The ability for miners to choose which transactions to include in a block is an optional feature, so the adoption of this new protocol does not necessarily mean that transaction selection will be replaced by mining pool operators anytime soon.

“While we know some large miners have been asking for this feature, we don’t know how many feel it’s important. Either way, it’s completely optional and they can leave transaction selection up to the pool,” said a Braiins spokesperson.

At the end of the day, it’s the responsibility of individual miners to be responsible for transaction selection and take it out of the more centralized mining pool industry.

According to a report from digital asset research firm Delphi
Digital, retail investor enthusiasm seems to have returned, so Bitcoin’s recent price volatility may continue for a while. By the end of 2019, Bitcoin may have a “good chance” of reaching $42,000.