In today's world of digital currencies, the centralization of Bitcoin mining is quite alarming, but solutions are in the works. The Bitcoin mining process is at the heart of the entire cryptocurrency ecosystem, but over time, people have begun to realize the potential risks that this centralization phenomenon may bring. This article will delve into the centralization problem of Bitcoin mining, analyze its roots and impacts, and explore ongoing solutions to look forward to the dawn of decentralization.

Bitcoin mining is the process of verifying transactions and adding new blocks to the blockchain by solving complex mathematical problems by computers. However, over time, Bitcoin mining has become increasingly centralized, mainly in the hands of a few large mining pools. This centralization phenomenon mainly stems from competition between miners, and large-scale mining pools tend to be able to obtain more computing power and thus obtain more rewards. This has led to a small number of mining pools controlling the computing power of the entire Bitcoin network, making the entire network vulnerable to attack or manipulation.

For example, in recent years, Chinese mining pools have dominated Bitcoin mining, which has made the computing power of the Bitcoin network highly concentrated within China. Once an accident or political intervention occurs, it may have a serious impact on the entire Bitcoin network. This centralization tragedy has caused people to worry about the security and decentralized nature of the Bitcoin network, prompting people to start looking for solutions.

So, in the face of the centralization problem of Bitcoin mining, how can we find a solution?

The key to solving the problem of Bitcoin mining centralization lies in promoting the development of decentralization. The core idea of decentralization is to maintain the security and stability of the entire network through decentralized computing power and network nodes, and avoid the risks brought by centralization. In recent years, some new mining algorithms and technologies have been proposed to promote the decentralization of the Bitcoin network.

For example, new consensus mechanisms such as Proof of Work (PoW) and Proof of Stake (PoS) have been widely discussed and studied. The PoS mechanism determines the right to generate the next block by holding currency, reducing the dependence on computing power, thereby reducing the possibility of centralization. In addition, some new mining pool protocols are also being explored, trying to change the centralized structure of traditional mining pools and achieve a more fair and decentralized mining method.

In addition, community participation and supervision are also key to promoting the development of decentralization. Members of the Bitcoin community actively participate in the mining process, supervise the behavior of mining pools, and advocate decentralized mining methods. Through the joint efforts and awareness of the community, the centralized status quo of Bitcoin mining can be gradually changed, and we can move towards a more decentralized and secure future.

In general, the centralized problem of Bitcoin mining is one of the important challenges facing the current digital currency field, but solutions are in progress. By promoting decentralized development, adopting new consensus mechanisms and technologies, and actively participating in the community, we are confident that we can overcome the various problems brought about by centralization and usher in a more secure and stable future for the Bitcoin network. The dawn of Bitcoin's decentralization is gradually rising, let us work together to welcome this new era of digital currency.

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The Bitcoin mining process is what truly differentiates the peer-to-peer electronic cash system from other forms of online payments. Rather than having a centralized third party that processes transactions, Bitcoin uses many dynamic, potentially anonymous entities to move money around the network.

It is the removal of this trusted third party that allows Bitcoin to operate in a sovereign-free, uncontrollable, and censorship-resistant manner. All of Bitcoin's differentiated uses are built on this fundamental function.

While using Proof of Work (PoW) to solve the double-spending problem was Satoshi Nakamoto's major breakthrough with Bitcoin, it is often viewed as one of the weakest points in the system to attack.

Someone who controls 51% of the computing power in the Bitcoin network is able to choose which transactions can be processed. Someone who controls a majority of the network hashrate can also reorganize the history of the network's transactions, maliciously attempting to spend the same money twice.

Gaining such a large percentage of the network hashrate is no easy feat, as the network hashrate is currently estimated to be around 70 million terahashes per second.

Hashrate is key to shutting down or regulating the Bitcoin network One economist says the best way to kill Bitcoin might be to try to have a hash race with it. Abra CEO Bill
Barhydt also noted that banning Bitcoin might be difficult from a legal perspective, at least in the United States.

At the Bitcoin 2019 conference in San Francisco last month, Bitcoin mining veteran and Genesis
Mining CEO Marco Strong claimed that he was very shocked by the current level of concentration in Bitcoin mining. However, this problem may soon be solved through a Bitcoin mining protocol upgrade.

The Alarming Trend of Increasing Centralization in Bitcoin Mining

In the early part of a panel on the future of Bitcoin mining at the Bitcoin 2019 conference, Strong made it clear that he does not believe that the current level of concentration in Bitcoin mining is acceptable.

“I think it’s actually very concerning,” Strong said.

“It’s very good that we’re talking about this because what we’re seeing 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 involved the concept of one vote per computer, this optimistic vision has long been abandoned in Bitcoin’s history. By 2012, ASIC hardware built for the specific purpose of bitcoin mining had been developed, and bitcoin mining was on its way to specialization and industrialization.

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

“I think that’s a really shocking thing,” Strong reiterated.

“I mean, it’s great to see community efforts like BetterHash, and longtime bitcoin developer Matt Claro driving these efforts. I think it’s really a serious problem, and in my opinion, the community has given it too high a priority. But it’s also not an easy problem to solve, because the big players have this inherent advantage.”

Matt Claro joined Strong on stage, but he disagreed with the level of concern expressed by the Genesis
Mining CEO. While Claro acknowledged that miners can gain an advantage by having access to the cheapest electricity in the world, he also pointed out that large blocks of cheap electricity, 10 to 100 megawatts, are in limited supply, and that these setups don’t necessarily account for the majority of the overall network hashrate.

“When you look at mining itself, it’s still a relatively decentralized system. Now, of course, when you look at mining pools, it’s a completely different story. But when you look at mining itself, we do have hundreds of players. Not all of them have more than one or two network hashrates -- in the absolute maximum there are up to five,” Corallo explained.

The long-time Bitcoin developer added that there are some possible concerns about the optimized facilities provided by industrialized Bitcoin mining centers.

A New Bitcoin Mining Protocol, Stratum v2

The third panelist, along with Strong, Claro, and BRD host Adam Bredman, was Braiins CEO Jan Čapek. Last week, Braiins announced a redesign of its mining protocol as part of a new, open, and transparent Bitcoin mining pool.

A key aspect of this new mining protocol, Stratum v2, is that it allows individual miners, rather than pool operators, to choose which transactions go into a mined block. As Claro noted in his remarks during the panel, the level of centralization in mining pools is much worse than it is with the actual miners, so moving the process of selecting transactions from pools to individual miners should be a boon for decentralization.

According to BTC.com, only four mining pools are currently needed to collude successfully To make matters worse, two of the pools are owned and operated by the same company, Bitmain.

The new mining protocol builds on the BetterHash project he’s been developing for the past few years, when it comes to shifting transaction selection to miners.

Of course, in order for the bitcoin network to gain any benefit from all this work, miners will need to adopt this new software. That being said, Braiins seems confident that such adoption will happen.

Stratum
v2 includes various security improvements for miners, which may be the main selling point. “At the end of all the discussions, there really needs to be a new standard that addresses most, if not all, of the needs,” Braiins said.

What kind of centralization tragedy is hidden behind Bitcoin mining?