The cryptocurrency community has been discussing mining centralization after a report was published that disclosed five mining operations command more than 50% of the BTC hashrate. At the time of publication, between F2pool, Poolin, Btc.com, and Antpool, the pools are hashing more than 59% of the BTC network hashrate.
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Data-Driven Report Says BTC Hashrate Distribution Is Centralized
On January 31, researchers from the firm Tokenanalyst published a report entitled “Centralisation in Bitcoin Mining: A Data-Driven Investigation” which covers the BTC hashrate distribution in 2020. The latest Tokenanalyst study stresses that BTC is decentralized and a trustless system, but researchers believe hashrate distribution is quite centralized.
“In 2020, bitcoin has also become a highly centralised system that places an increasing amount of trust in a small number of large entities,” the report notes. Not only is the mining landscape “dominated by a small number of entities,” but Tokenanalyst also thinks “a few large crypto exchanges” dominate the industry as well. Tokenanalyst analyzed 276,000 distinct addresses that have received coinbase rewards and they “meticulously” QA’d their metrics and found 148,000 miner addresses “across the whole history of the bitcoin blockchain.”
“Of these 148k labeled addresses only 6.3k have ever received a coinbase reward,” the report details. “The other addresses are used by miners for other purposes, such as internal routing and change wallets to facilitate payments to mining pool participants.” The report continued by adding:
Of the 276k addresses that ever received coinbase rewards, 270k are unlabeled, and of these, 225k addresses (81.5% of the total) were only ever used once. Of the 6.3K labeled addresses that received block rewards, just 517 addresses received block rewards on more than 1 occasion (0.2% of the total). However, these 517 addresses are responsible for receiving a vast proportion of the block rewards in recent years.