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NEW YORK (InsideBitcoins) — Earlier this year, there was panic in the bitcoin community due to GHash.IO’s large share of the bitcoin network hashrate. The control over the majority of bitcoin hashing power could have potentially led to GHash.IO attempting to double spend their own transactions or block other transactions on the network. This is known as a 51% attack.
The concerns surrounding this control over bitcoin’s method of processing transactions led to bitcoin developer Peter Todd selling half of his bitcoin holdings. Although the fight against bitcoin mining centralization should not be viewed as finished, the industry has become a bit more decentralized over the past few months. GHash.IO has mined roughly 19% of the bitcoin blocks over the past four days, which is less than half of their output from just a few months ago.
There are a few different theories that could explain why this distribution of mining power has taken place, but the reality is that no one can really know the true source of the shift away from centralization.
Discus Fish takes control
Discus Fish actually overtook GHash.IO as the largest public bitcoin mining pool a couple of months ago. The mining pool is based in China and has experienced rapid growth over the course of 2014. 25% of the total blocks mined over the past four days have been found by Discus Fish, and the bitcoin community is bound to start a new campaign against the Chinese mining pool if it continues to gain more control of the network hashrate.
Then again, there could be another pool to replace Discus Fish in the near future, much like Discus Fish replaced GHash.IO as the top dog. Discus Fish co-owner Wang Chun has also stated that the pool operators would likely use mitigation techniques, such as higher fees, to persuade miners to join other pools if Discus Fish started to get close to a 51% share of the bitcoin network hashrate.
Hiding in the unknown?
Although the public record of block rewards shows that GHash.IO’s share of the network hashrate has dropped below 20%, that statistic doesn’t tell the whole story. Roughly 25% of the blocks mined over the past four days have been found by unknown miners, and one of those unknown miners could be GHash.IO. Although these sorts of allegations are downplayed as nothing more than conspiratorial by some, the fact of the matter is this would be a perfect method for GHash.IO to hide some of their excess hashing power.
Bitcoin’s Achilles heel
The centralization of mining has long been bitcoin’s achilles heel; however, it seems unlikely that this will eventually lead to the complete collapse of the digital currency. Economist Kevin Dowd recently claimed the structure of incentives in the bitcoin network would ultimately lead to a mining monopoly, but it’s important to remember that miners (and other businesses in the bitcoin space for that matter) have an incentive to push for decentralization, too. After all, bitcoins won’t be worth very much if they’ve lost their censorship-resistant properties.
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