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Rapid consolidation of Bitcoin mining pool operators
6 points by cs702 on Dec 12, 2013 | hide | past | web | favorite | 3 comments
As I write this, blockchain.info estimates that two mining pool operators, GHash.IO and BTC Guild, currently control 57% of hashing power in the Bitcoin network. Three operators, the two just mentioned plus Eligius, control 68%. Five operators control 81%.[1]

Could two or more of these large pool operators ever take advantage of their position, for example, by secretly partnering to gain control over new block generation?

Is pool formation and consolidation an unavoidable consequence of the increase in block difficulty, as more miners opt for small, 100% certain rewards instead of large, highly unlikely ones?

Should the consolidation of pool operators be cause for concern? Could the largest pools ever find a way to impose higher transaction fees on the network?

Are we witnessing the creation of a new type of centralized or oligopolistic financial system?

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[1] https://blockchain.info/pools

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Edits: changed title so it better reflects what I intended to write; also, added and expanded several questions.





one of the incentives for refraining from a 51% attack is the exchange rate of bitcoin itself. such an attack being carried out and publicised would very likely deal a major blow to the currency exchange rate. as these pools make money from mining bitcoins (that is after all their very reason for existing) they would then lose out financially in a big way. in order to make up for these losses they'd have to doublespend a shitload of bitcoin in exchange for stable assets. and the greater the doublespend problem gets, the more confidence in btc is eroded, which then, once again, makes the price plummet.

thus, from my amateur perspective, this seems highly unlikely atm.


Indeed, a majority attack is a lose-lose scenario.




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