On Wednesday, crypto analyst Chris Blec highlighted that Bitcoin’s two major mining pools now control over half of the network’s total hashrate. Blec posits this dominance could transform bitcoin mining into an industry adhering to regulatory standards, with all miners required to follow Know Your Customer (KYC) guidelines.
Control Over Bitcoin’s Hashrate Is a Nuanced Topic
Currently, Antpool leads with a 30% share of Bitcoin’s total hashrate, closely followed by Foundry USA, which holds 26%. Together, these pools exert a 56% influence over the network’s 468 exahash per second (EH/s) hashrate. Chris Blec, a noted figure in the crypto research community, voiced his concerns on the social media platform X this Wednesday. Emphasizing the gravity of the situation, Blec stated, “It’s important,” and assured that his disclosure is a reflection of reality, not FUD (Fear, Uncertainty, and Doubt).
“The [two] largest bitcoin mining pools, together controlling over 50% of hashrate for over [one] year now, are regulatory-compliant and require all miners to comply with KYC,” Blec said. “The government has clear identification, visibility [and] control over more than 50% of Bitcoin’s miners (by hashrate).” The researcher added.
The government can make demands of these people/companies and they’ll be required to comply. As this trend grows, Bitcoin’s decentralization [and] game theory both get affected in a negative fashion.
A few years back, archived data paints a picture of a more diverse landscape in dominant mining pools. Following Blec’s remarks, there was a flurry of responses. Jon Black countered, “These [two] pools only have 51% of the hashrate because they are behaving (for now).” He speculated that any misbehavior would prompt a shift in hashrate to smaller, non-KYC compliant pools. Blec dismissed this idea as “completely theoretical.”
Harry Beckwith then addressed Blec, saying, “I can definitely appreciate this but you are making mining pools sound monolithic as though they are single players and that is not true,” Beckwith said. “They basically function like a co-op and individual miners can do whatever they want if they don’t like the direction of the co-op.”
Beckwith’s argument has become a significant talking point in this ongoing debate, considering the complex nature of hashrate control. Under Stratum mining software version one (v1), pool operators handle the pool’s infrastructure and decide on the transactions for mining blocks. Individual miners, while contributing their computational power, don’t directly influence how this collective power is utilized. They mainly provide the necessary resources. Yet, their potential to migrate to other pools if dissatisfied does play a role in the co-op dynamics.
The introduction of Stratum version two (v2) brought a notable change. It features “Job Negotiation,” empowering individual miners to select transactions for their block templates, lessening the pool operator’s influence on block contents. However, most pools today use Stratum v1, with Stratum v2 alternatives like Stratum-mining and BraiinsOS/BraiinsOS+ available.
A 2022 Galaxy.com report notes that miners prefer v1 for its ease of adoption, while a comprehensive Stratum full feature set is still under development. The report highlights a critical industry divide: the differing desires of ASIC manufacturers and developers. “The rigmarole of getting ASIC manufacturers to include Stratum v2 into their firmware highlights an interesting underlying dynamic at play: the mining industry is very divided between what the manufacturers want and what the developers want,” Galaxy’s researchers detail.
This division underscores the validity of concerns about mining centralization. Galaxy researchers further underscore that Stratum v1 “is not designed for the high hashrate levels we experience today.” In the meantime, while bitcoin mining pools maintain their current conduct, critics like Chris Blec argue that this alone is insufficient.
What do you think about Chris Blec’s argument concerning mining centralization? Share your thoughts and opinions about this subject in the comments section below.