Today, the era of belonging to small mines is over. Thanks to the growth of large mining farms (i.e. Bitmain), we can enjoy a more stable and fast network. But this comes at a price, with fewer than 20 companies controlling more than 90% of Bitcoin’s total computing power.
Satoshi Nakamoto invented and designed a nearly perfect balance of rights mechanism to prevent someone from arbitrarily keeping accounts and controlling the system. Among them, the workload proof (PoW) mechanism is the core cornerstone of the blockchain. This mechanism promotes the development of a decentralized network by rewarding participants who provide computing power, making the network more stable and secure. This behavior is also called "mining".
But the creator of Bitcoin underestimated the side effects of the PoW mechanism. The continuous development of ASIC mining machines may lead to the concentration of Bitcoin computing power in the hands of a few people, and eventually pose a major threat to the entire network.
As the Bitcoin network began to grow rapidly, so did the demands on its computing power. The PoW mechanism has triggered fierce competition among participants, and it has become increasingly difficult for small mines to be profitable or even survive. This competition has further intensified as the prices of cryptocurrencies have risen. With the entry of large companies, this competition has become an "arms race", with more advanced and efficient equipment winning.
Bitmain’s dominance and the risk of a 51% attack
As one of the world's leading manufacturers of application-specific integrated circuit (ASIC) mining machines, Bitmain's revenue in 2017 was US$2.5 billion and its net profit exceeded US$1.1 billion. It is undoubtedly the winner of this competition. Research and development and production of mining machines are the main business of Bitmain. From the perspective of sales ratio, the sales revenue of domestic and foreign mining machines has reached more than 90% of Bitmain's total sales revenue in 2017. Bitmain's products have outstanding performance. Their ASIC mining machines are more power-efficient and have higher computing power, and of course higher profits. It is not surprising that those savvy miners are driven by profit to choose equipment that can obtain high returns. Sitting on the world's largest mining pool (AntPool) and excellent hardware equipment, Bitmain can influence and even manipulate the entire Bitcoin network.
Bitmain is currently facing a situation of dominating the entire industry. One of the consequences is network centralization, which makes Bitmain's business itself the biggest threat to the Bitcoin network. As Vitalik pointed out recently at a conference in Zug, Bitmain controls almost 53% of the network’s computing power, which poses a serious risk of a 51% attack. Although such an attack is unlikely to come from Bitmain as it would destroy their business model. But this is an unacceptable situation if Bitcoin is to earn the trust of the wider community.
The Bitcoin network experienced a similar situation in 2014, when the GHash.IO mining pool reached close to 51% of the network's computing power. In the end, GHash.IO made a voluntary statement that it would not exceed 39.99% of the computing power, and the team also encouraged other mining pools to make similar statements for the benefit of the entire community.
New hardware providers and other mining pools
Although Bitmain may continue to dominate, we can see the high-profile layout of its competitors challenging Bitmain's position. Innosilicon is a domestic IP/IC design company. Its Innosilicon A9 ZMaster beat Bitmain Ant Z9 with a computing speed of 50 ksol/s. Compared with Bitmain Ant Z9’s $65.47 per day, the company achieved Daily profit of $83.10 (as of July 29).
At present, mainstream mining pools can be divided into Bitmain and non-Bitmain mining pools. Bitmain mining pools have inherent advantages such as discounted mining machine prices and fast access to mining machines; non-Bitmain mining pools rely on their own reputation and differentiated services are supported by miners. Choosing small non-Bitmain mining pools is one way to defend against centralization and malicious attacks. This fits with the values of the decentralized world, and at least some cryptocurrency miners still believe in it.
The bitcoin mining market is now dominated by ASIC miners, specialized devices that are more powerful and more efficient than mining with GPUs and CPUs. GPU mining may be considered obsolete, but it is still an option that can be profitable with proper handling. Creating a miner that can mine any cryptocurrency, including ASIC resistant coins, is another good practice.
decentralized future
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(I am Mu Xinxin, a reporter from Odaily. I am exploring the real blockchain. Please add WeChat wsuixin12 for breaking news and communicating. Please note your name, unit, position and reason.)
