As was to be expected, but which was threatened as certain cryptocurrency mining companies began to take control, Bitcoin Core (BTC) mining operations are becoming more decentralized. Canaccord Genuity Group, a wealth management company out of Canada, made the revelation in a report published earlier today, helping to show that crypto mining is taking a wider distribution position.
Canaccord tracks the digital currency and blockchain markets and states that, over the past five years, the distribution of BTC’s hash rate has expanded, bringing in more entities to boost the digital currency’s mining operations. The biggest gain was seen in 2014 when Ghash.io controlled about 50% of the market, but today not one single pool controls over 19% of the entire hash rate. Five mining pools control between 10-20% of the hash and the remainder control less than 10% combined.
The company asserts that a number of factors have contributed to the increased decentralization, including the “commoditization of bitcoin mining chips, as advances in ASICs [application-specific integrated circuits] have slowed allowing for broader competition for bitcoin’s mining rewards.”
At one point, Bitmain, through its two crypto pools, was approaching 50% control of the hash last year. However, the company has continued to tumble downhill following a number of setbacks and bad corporate decisions and now controls less than 23%.
With both Ghash.io and Bitmain, there was a considerable amount of concern that either company could take control of 51% of the hash, giving them de facto power of the blockchain. Similar to how an entity with 51% of a business can dictate the company’s movements, a crypto mining pool with majority control could conceivably stop and start, or even reverse, transactions, which would completely undermine the entire crypto ecosystem.
Canaccord also referred to the Herfindahl-Hirschman Index (HHI) to substantiate the increased decentralization. An HHI score of less than 1,500 indicates a competitive marketplace, a score between 1,500-2,500 is a moderately concentrated marketplace and a score of more than 2,500 demonstrates a highly concentrated marketplace. BTC’s mining scored 1,200.