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50 Miners Control 50% of Bitcoin Mining Worldwide

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Part of Bitcoin's appeal is the idea that nobody controls it, but a recent study found that 0.1 percent of the network's top contributors—just 50 miners—controls 50 percent of Bitcoin's mining capacity. Zooming out to the top 10% of miners finds that they control 90% of mining capacity. Traditional currencies are managed by central banking systems, international organizations, and well-established financial service providers; cryptocurrencies are managed by their networks. But a recent study from the National Bureau of Economic Research (NBER) found that a few entities account for a significant portion of the Bitcoin ecosystem. 

Bloomberg reported that the NBER study, which is titled "Blockchain Analysis of the Bitcoin Market," found that the "top 10,000 individual investors in Bitcoin control about one-third of the cryptocurrency in circulation." The study's authors said that 14 million BTC were in circulation at the end of 2020. Of those, 8.5 million were controlled by individual investors, and 5.5 million were controlled by intermediaries.

But the authors, Igor Makarov and Antoinette Schoar, also said that "this measurement of concentration most likely is an understatement since we cannot rule out that some of the largest addresses are controlled by the same entity." Bloomberg said the most noteworthy example is the attribution of 20,000 addresses believed to be owned by "Satoshi Nakamoto" to 20,000 people instead of just one.

NBER's findings regarding Bitcoin mining are even more worrisome for the cryptocurrency's enthusiasts. The study found that 0.1 percent of the network's top contributors—just 50 miners—controls 50 percent of Bitcoin's mining capacity. That proportion grows to 90 percent of the cryptocurrency's mining capacity when the top 10 percent of miners are taken into account.

"Our results suggest that despite the significant attention that Bitcoin has received over the last few years, the Bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, Bitcoin holders or exchanges," Makarov and Schoar said. "This inherent concentration makes Bitcoin susceptible to systemic risk and also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants."

That systemic risk includes the possibility of a so-called 51 percent attack through which a group of Bitcoin miners could take control over the network. That group would be able to double-spend BTC, reverse transactions, and halt further usage of the cryptocurrency. NBER's findings suggest that just 51 of Bitcoin's top miners would have to work together to conduct such an attack on the entire network.

The findings also indicate that Bitcoin critics who say the cryptocurrency is essentially a vehicle for making a relatively small number of people incredibly wealthy might be on to something. Bitcoin's increasing popularity isn't affecting most people, but those who bought into the ecosystem when it was still young are becoming richer and richer, especially as the price of BTC continues to rise.

These claims track with Bitcoin's development over the years. It makes sense for a small number of operations to account for the vast majority of production now that mining Bitcoin requires dedicated hardware and massive amounts of electricity. The cryptocurrency's rising price also makes it more difficult for the average person to amass the same amount of BTC as someone who started hoarding it in 2009.

  • Kamen Rider Blade
    Proof is in the pudding, BitCoin / CryptoCurrency isn't as de-centralized as the marketing would have you believe.

    If they really wanted to DeCentralize, there needs to be "Proof of Decentralization & Enforced limits of Individual Hashing Capacity" of the entire network.

    No one person should be able to have more than 0.001% of the total Networks Hashing Capacity.

    NBER's findings regarding Bitcoin mining are even more worrisome for the cryptocurrency's enthusiasts. The study found that 0.1 percent of the network's top contributors—just 50 miners—controls 50 percent of Bitcoin's mining capacity. That proportion grows to 90 percent of the cryptocurrency's mining capacity when the top 10 percent of miners are taken into account.
    50 People control 50% of the mining capacity, that comes out to an average of 1% per person, that's WAY too much power concentrated in a individual/entity.

    0.1% ~= 50 miners
    10% of miners ~= 90% of Total Network Hashing Capacity
    10% of miners ~= 5000 Miners
    90% of Total Network Hashing Capacity ~= 5000 Miners ~= 0.018% per Individual Miner/Entity.

    That isn't decentralized enough IMO.

    The upper limit should be Hard Capped / Set at 1 Individual Miner/Entity should be capped at 0.001% of Total Network Hashing Capacity.
    Reply
  • hotaru.hino
    Meet the new boss, same as the old boss.
    Reply
  • Kamen Rider Blade
    hotaru.hino said:
    Meet the new boss, same as the old boss.
    Maybe ALL Governments should HEAVILY regulate CryptoCurrency, this looks like a overly complicated Ponzi Scheme to me.
    Reply
  • JamesJones44
    Believing no one can corner the market on a scarce commodity is just a fool's errand and clearly sleep through economics.
    Reply
  • VforV
    This is nothing new, for dozens of years now we knew that the ~200 top elites in the world control more than 50% of the world's wealth.

    This happening in crypto too, is just a "natural" extension of the same issue...
    Reply
  • InvalidError
    Crypto intended to democratize the monetary system is turning into another monopoly because everyone is flocking to the same few large mining pools to make their income more predictable? What a non-surprise!

    Things are going to get really interesting if people heading the major mining pools do pull off some 51% attacks.
    Reply
  • DougMcC
    Obvious solution to the mining concentration problem is to instead grant each newly mined unit of crypto to a random participant in the network, and make the motivation for mining the desire to have more fluidity by the network participants.
    Reply
  • salgado18
    Money generates more money. Those who earned money reinvested in new machines, that produced more money for more machines. Never sell, only reinvest. When risk traders lose, their loss goes to big players, who only keep and accumulate, to generate more money. That's the capitalist game, anywhere.

    Without heavy regulation by the society/state, it will all converge into a concentration of wealth.
    Reply
  • Phaaze88
    salgado18 said:
    Money generates more money. Those who earned money reinvested in new machines, that produced more money for more machines. Never sell, only reinvest. When risk traders lose, their loss goes to big players, who only keep and accumulate, to generate more money. That's the capitalist game, anywhere.

    Without heavy regulation by the society/state, it will all converge into a concentration of wealth.
    And that's screwed up, because the money doesn't feed back into the economy as much as it should - it mostly stays up there.
    Companies expect infinite growth...
    People trying to get rich quick, so they can be in that top 1% or whatever...
    And so on. It's rather depressing.
    Reply
  • Kamen Rider Blade
    Phaaze88 said:
    And that's screwed up, because the money doesn't feed back into the economy as much as it should - it mostly stays up there.
    I concur.

    Companies expect infinite growth...
    Which we need to regulate out of existence and teach them that "Infinite Growth" is NOT REALISTIC and VERY MUCH ILLEGAL.

    People trying to get rich quick, so they can be in that top 1% or whatever...
    Again, I concur that we should regulate the hell out of it.

    And so on. It's rather depressing.
    Yup. Too many people want to participate in "Get Rich Quick" schemes.
    Reply