Centralized vs Mining Decentralized Crypto: All you need to know

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Centralized vs Mining Decentralized Crypto: All you need to know

Decentralization is a distinctive feature of blockchain, but those who know bitcoin should be aware that many aspects of bitcoin never implement decentralization operations. Instead, they go further and further in the direction of centralization, such as mining.

People originally thought that as the distributed network, everyone could use their computers to mine bitcoin just as Nakamoto Satoshi did in the very beginning. Later, people started to use the GPU to mine because of the higher efficiency. Then, they began to use ASIC miners with much higher efficiency than that GPU miners. However, ASIC miners demand a lot of money and not everyone is rich in the world, so the hash of mining is controlled by a few people.

Why the need to Mine?

The essence of mining is “the printing and the distribution of currency without centralization”.

Mining is a fair process of currency distribution. The total amount of bitcoin is 21 million, which cannot be exhausted till the year 2140. Who will own all these newly mined coins? The mining workers, of course.

Mining is a game of competition among all the mining workers. Such a game has no administrative threshold. So long as you are willing to spend resources and money, you can join in the game. Therefore, it’s known as a decentralized currency distribution process.

Mining also has two other main functions. One is the package transaction, which is the process of accounting and checking for cryptocurrency users. The other is the deployment protocol upgrade. When the cryptocurrency system needs to be upgraded, the mining workers need to have their own node software upgraded based on the new protocol. If not, the entire cryptocurrency system cannot be upgraded smoothly.

Centralized vs Mining Decentralized Crypto: All you need to know

Bitcoin Mining Becomes More and More Centralized

The mining of bitcoin has developed from CPU, GPU, and FPGA to ASIC and the hashrate has become more and more centralized.

The existence of hashrate maintains the security of bitcoin, but as the mining tends to be more and more centralized, the appearance of farms and pools makes the miners and hash more integrated together. Those who control a huge amount of hash pose a potential threat to cryptocurrency, although everything seems to be still operating as normal.

At the Bitcoin 2019 Conference, Marco Streng clearly stated that he didn’t believe the current level of concentration of bitcoin mining is acceptable.

I think it’s actually quite alarming,” said Streng. “And it’s very good that we’re talking about that because we are seeing a radical, innate drive that basically originates from the competitive advantage that large-scale mining operators have compared to the home miners.”

According to Nakamoto Satoshi’s initial concept, the mining process was designed to vote for each computer. But this optimistic idea has been abandoned in the development of bitcoin.

2012, the ASIC hardware devices especially for bitcoin mining were developed. The scaled economy bodies, the world’s cheapest electricity supplier, and the largest hardware participants have owned the advantages that ordinary people with a small number of miners never have.

Decentralized Mining

The mining algorithm suitable for the long-term development of blockchain technology should be democratic and fair behavior, which can attract the participation of more ordinary people, prevent the centralization of mining and ensure enough mining nodes are dispersed so that everyone can get involved in the cryptocurrency.

However, the reality is that bitcoin mining is developing in the direction of specialization and industrialization. Scaled mining workers have controlled the hashrate so that individual influences become negligible. Has it violated the original intention of bitcoin?

Centralized vs Mining Decentralized Crypto: All you need to know


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