Ever since I explained the reasons why in 2014's Economies of Scale in Peer-to-Peer Networks
, I have been pointing out that Bitcoin isn't decentralized, it is centralized around five or fewer large mining pools. Ethereum is even more centralized; last November two pools controlled the majority of Ethereum mining. On 13th
June 2014 GHash controlled 51%
of the Bitcoin mining power. The miners understood that this looked bad, so they split into a few large pools. But there is nothing to stop these pools coordinating their activities. As Vitalik Buterin wrote:
can we really say that the uncoordinated choice model is realistic when 90% of the Bitcoin network’s mining power is well-coordinated enough to show up together at the same conference?
and Makarov and Schoar
Six out of the largest mining pools are registered in China and have strong ties to Bitmain Techonologies, which is the largest producer of Bitcoin mining hardware
Although as I write it is still true that 5 pools control the majority of Bitcoin mining (and 3 pools control the majority of Ethereum mining), over the last 18 months there has been a significant change in the traceability of Bitcoin mining pools. The graph shows that the proportion of pools actively obfuscating their identities has increased, so that "unknown" has been close to and occasionally above 50% of the Bitcoin mining power. It was bad enough that "trustless" meant trusting 4-5 pools, mostly in cahoots with Bitmain. But now "trustless" means trusting a group of miners who are actively hiding their identities and, for all you know, could be one large confederation. Alternatively, they could fear attacks from other miners!
Earlier this month How ‘Trustless’ Is Bitcoin, Really?
by Siobhan Roberts drew attention to Cooperation among an anonymous group protected Bitcoin during failures of decentralization
by Alyssa Blackburn et al
that pushed Bitcoin's centralization problem back to its earliest days. Below the fold I discuss the details.