The following is a guest post by Kadan Stadelmann, CTO of Komodo Blockchain.
While the centralization of Bitcoin miners threatens Bitcoin, former President Donald Trump’s promise to significantly reduce energy prices could ensure Bitcoin’s decentralization.
According to blockchain analytics firm CryptoQuant, the vast majority of bitcoin mining appears to be concentrated in China, with a small number of organizations in the mining pools sector accounting for roughly 54% of the bitcoin hashrate.
China reportedly bans cryptocurrency mining Exaggerated Local situation: The country continues to dominate in hashrate thanks to cheap electricity and infrastructure.
A Bitcoin mining pool is a network of miners that mine Bitcoin blocks and share their results. Reward, the profit earned by mining a new block. Most miners direct their hashing power to pools because it is easier, cheaper and has a higher chance of finding a block.
These mining pools have concentrated Bitcoin mining in an increasingly small number of miners. Today there are only two mining pools USA Foundry and Antpool account for roughly 50% of Bitcoin's hashrate.
This poses a risk to the security and resilience of Bitcoin: if enough mining pools formed a cartel and coordinated their use of hash rate, they could affect transaction processing across the entire Bitcoin network and have the power to censor transactions.—They essentially act as a bank that can “freeze” your account in a disintermediation system.
Concentrated mining is a real threat
Additionally, bitcoin mining pools like Btc.com, Binance Pool, and Poolin not only account for the majority of bitcoin mining, but also use identical block templates (formatted structures for mining software) to select and order the exact same transactions as each other, exactly the same as Antpool, one researcher reported. analysis By a Bitcoin developer named 0xB10C.
The fact that these mining pools all employ the same block templates, transaction selection, and ordering criteria indicates coordination or standardization of mining operations across these platforms, which could undermine Bitcoin’s decentralization and threaten the security of the network.
As Bitcoin mining becomes consolidated into several mining pools, these organizations can start to standardize their transaction selection and filter out transactions. For example, if pools want to cooperate with each other and easily censor transactions, they can refuse to process CoinJoin transactions (multiparty transactions that mix addresses and signatures to anonymize transfers).
Miners who contribute their hashrate to larger mining pools should choose their own block template policy. This is the only way miners can maintain their central role in choosing what goes into a block without having to create templates from scratch. Miners need freedom of choice, not homogenization of transactions by a few pools making all the decisions.
Trump is attractive to miners
President Trump has pledged to lower energy costs within his first 12 months in office. “Under my administration, we will cut energy and electricity rates by at least half,” he told a crowd in Asheville, North Carolina, on Wednesday.
in Bitcoin 2024 Speaking at a conference in Nashville, Trump said he would bring “enormous” amounts of electricity to the U.S. to “dominate” mining operations.
“To gain dominance in the United States, we would need twice as much electricity as the United States has today, but we can get there.”
He said his administration would:
“We're going to build power plants on the (mining) sites,” and “free people from certain ridiculous requirements, and we're going to use fossil fuels to make electricity, because we have to.”
If he keeps his promise, the US will become an attractive jurisdiction for mining companies and pools.—Due to competitive electricity prices with China and the relative rule of law in the US—To compete with Chinese competitors.
The US needs to invest in all kinds of energy, be it oil, nuclear or solar, to maintain its influence. The US has a ton of oil, and by getting it out of the ground, Trump can drive down the price of oil in the country. This will help bitcoin miners and help the US reach its sustainability goals, as cheaper oil can be used to produce cleaner energy.
If Trump could make the US the cheapest electricity in the world, Bitcoin would immediately become less threatened by attacks from centralized miners, including 51% attacks. Cheap electricity would break down the centralization of Bitcoin mining.
The more miners and mining pools there are, the more decentralized the Bitcoin network will be, and if Trump keeps his promise, the US could make mining more accessible with cheap electricity.
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