Data shows 50% of Bitcoin hashrate is controlled by two mining pools

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Bitcoin’s hashrate is becoming highly centralized, with a few mining pools controlling most of the blockchain’s mining power. The latest data from Mempool indicates that 50% of the total hashrate is held by Foundry USA and Antpool.

A highly centralized mining network

Foundry USA maintained a hashrate of over 30% of the total Bitcoin network for several weeks. It became the first non-Chinese mining pool to lead the list in November 2021, following the ban on Bitcoin mining in China in the middle of the same year.

At the time, Foundry USA contributed 17% of Bitcoin’s total hashrate. Today, the US-based pool averages 34.1% of the mining power, which equates to around 104 EH/s, given that the Bitcoin hashrate is around 300 EH/s.

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Antpool comes second with around 18.0% of the total hashrate equivalent to around 58 PE/s. The China-based pool was once the largest bitcoin pool, but was affected by the crypto mining ban which caused the migration of several miners from the region.

Bitcoin Pool distribution records on December 29, 2022 (3-day stats)/Mempool.comWhat’s behind this trend?

The chart shows that over 80% of Bitcoin’s mining power is concentrated in just 5 pools. This contrasts with the start of 2022, when these five mining pools barely exceeded 60% of the hashrate.

Certain factors may have contributed to this increase. One of them is the location of the servers of said pools. The closer the servers are to pools and mining facilities, the lower the information transfer latency. This means that a miner will likely get more shares in the mining process and earn more Bitcoin (BTC) by connecting to a closer server.

Bitcoin Hashrate Difficulty for January/CoinWarz.com

Another factor is the financial incentives offered by these large mining pools. Larger mining pools can regularly distribute profits to their members, who pay a commission for mining with their resources, thereby attracting more miners to their ecosystem. This is evident with the great mining difficulty in recent weeks due to the bullish movement of Bitcoin, which makes it difficult for small mining pools to be profitable.

Related Reading: Why the S&P 500 Could Help Push Bitcoin Higher

However, Bitcoin’s highly centralized mining system presents significant dangers to cryptocurrency. Miners could agree to reject transactions that do not meet a specific parameter leading to a 51% attack.

We have seen such attacks happen on other Proof-of-Work blockchains like Ethereum Classic, which could be a problem for Bitcoin. Additionally, these pools are reputable companies and could face pressure from regulatory agencies trying to control activities on the Bitcoin network.

bitcoin price

So far, Bitcoin is still maintaining its uptrend, with the top cryptocurrency up 40% year-to-date. At the time of writing, Bitcoin is trading at $23,400, according to data from Tradingview.com.

Bitcoin Price January 28 | Source: BTCUSDT TradingView

Featured image from Pixabay, charts from Trading View, Coinwarz and Mempool

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