• Bitcoin mining is becoming increasingly centralized with two pools controlling over 50% of the hash rate.
• Mining pools allow miners to combine their computing power and increase their chances of winning the proof-of-work competition more frequently.
• The rewards are then redistributed to all members in proportion to the computing power they have provided.
Centralization Of Bitcoin Mining
Bitcoin mining is becoming increasingly centralized, with two major pools Foundry USA and Antpool controlling over 52% of the global computational power. This centralization could have serious implications for Bitcoin’s security and censorship resistance, as well as its decentralization goals.
What Is Pool Mining?
Pool mining is a method that allows miners to unite their computing resources in order to increase their chances of winning the proof-of-work competition more frequently. By combining forces, they can probabilistically write more blocks and receive more rewards than an individual miner could on his own.
The Benefits Of Pool Mining
By pooling together, miners can increase the frequency at which they receive rewards, allowing them to pay for electricity or other expenses associated with running a mining farm more easily. Additionally, pool mining also ensures that rewards are fairly distributed among members according to their respective contributions in terms of computing power.
The Risks Of Centralized Mining
With two large pools controlling such a significant portion of the hash rate, there is an increased risk for 51% attacks or other forms of censorship or manipulation on the network by these entities. This poses a threat not only to Bitcoin’s security but also its decentralization goals.
Pool mining provides numerous benefits for miners such as increased frequency in receiving rewards and fair distribution according to contributed computing power; however, it should not be taken lightly as it does come with certain risks such as potential centralization by large entities leading to potential security threats on the network and censorship issues