• Bitcoin mining is becoming more centralized with two major pools controlling over half of the global hash rate.
• Mining pools are a collective of miners and mining farms that combine their resources in order to win the proof-of-work competition more frequently.
• Mining pools can help individual miners survive in a highly competitive environment, but this centralization of power has implications for Bitcoin as a whole.
What Is Pool Mining?
Mining pools are servers run by companies that unite mining farms and individual miners located in different areas, pooling their computing resources to form one team that participates in the competition of bitcoin mining. This allows them to have higher chances of winning the proof-of-work compared to an individual miner alone, and redistribute rewards to all members proportionally according to the amount of computing power they provided.
Centralization Of Power
Recently, Foundry USA coordinated 34% of the hash rate alone while Antpool had 18.2%, totalling 52% controlled by only two mining pools. This centralization has been pointed out by Bitcoin developer Peter Todd who warns us about its implications for Bitcoin as a whole.
Why Are Mining Pools Necessary?
Mining is a highly competitive activity which requires miners to keep machines running and pay for electricity, hardware or other expenses regardless of changes in the price of bitcoin. Pool mining helps individuals survive this environment by receiving frequent pays outs instead of waiting 5 years for a $100 000 reward.
The Future Of Pool Mining
Many Bitcoiners hope that household appliances such as smartwatches and smart glasses will be able to mine with specialized microchips in the future, what Antonopoulos calls “mining within everyone’s reach”. However, we are still far from it today so it is important to understand what implications come with centralizing power within big pools like Foundry USA and Antpools if we want BTC remain decentralized as it was meant to be from its genesis chapter onwards.
Pool mining can help individual miners stay afloat when competing against bigger players but it should not come at cost of making Bitcoin less decentralized than its original intention was from its inception onwards which is why understanding these implications is crucial if we want BTC remain free from censorship and regulation