Bitmain Technologies Ltd, the biggest Bitcoin mining company, is close to achieving a majority control of the Bitcoin network. In the past week, Bitmain mined 42 percent of all Bitcoin blocks as it approaches a 51 percent of the network hashrate that would give it majority control.
Bitmain owns BTC.com and Antpool mining pools. Through its pools, Bitmain may soon reach the dreaded majority control; BTC.com mined 26.6 percent while Antpool mined 15.3 percent in the past week. Reports suggest that the company created a subsidiary, Ant Creek through which obtained a license to operate in the US.
Bitmain has a huge advantage over other Bitcoin miners in that it manufactures its own mining equipment. It is known for its application-specific integrated circuits (ASIC) miners that mine Bitcoin much faster than high-end graphics processing units (GPU) used by other miners. The chip makers set the market agog with the release of its sophisticated “Antminer E3” chip to compete with the best technology from industry giants AMD and Nivida.
It also rivals big names in financial statements. Last year, following the surge in cryptocurrency prices, Bitmain posted huge profit margins between $3 and $4 billion placing it in the same bracket as Nivida.
To maintain its strong market share, Bitmain run mining pools and offer cloud mining services. It also mines Bitcoin Cash (BCH) which uses the same algorithm as Bitcoin (BTC).
What will Happen if Bitmain reaches 51% hashrate?
51% control by a single party on a blockchain evokes serious thoughts because the party can compromise the blockchain through a “51% attack”. The party can perform double spends and censor transactions.
While the fear is a legitimate one, it may not bring grave consequences in this case. It is unlikely that Bitmain will carry out a 51% attack even if it achieves the majority. This is control because it has a greater incentive not to. However, a corrupt team member or an outsider can take advantage of the majority control to orchestrate an attack.
How best can this fear be addressed?
Bitmain could take a cue from Ghash, who in 2014 crossed the 51% mining pool threshold. Following the controversy that ensued, Ghash proposed for miners to move their resources to different mining pools, thereby losing the majority. The tasked any company which reaches that threshold in the future to do the same. But Bitmain is different from Ghash; whereas Ghash was a collection of small miners, Bitmain is a big mining corporation.
One may propose a change in Bitcoin’s Proof-of-Work (PoW) algorithm but this may pose its own challenges, not the least a security concern.