Bitcoin mining threatens to centralize – existential threat?

If we the words of Kadan Stadelmann believe, Bitcoin is in danger of falling into the hands of a select group of miners. According to him, this is mainly due to the centralization of so-called mining pools, which he calls an existential threat to the freedom of Bitcoin.

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Problem is in the design?

According to Stadelmann, the problem lies in the design itself. In the beginning, miners could still work with CPUs to mine Bitcoin. This changed to GPUs around 2010 and then in 2012 moved to ASIC (Application-Specific Integrated Circuits) devices, chips specifically designed for mining Bitcoin.

This created large Bitcoin miners with enormous warehouses full of ASIC machines.

Miners with a larger percentage of the total computing power in the network (hashrate) have a greater chance of mining blocks and earning Bitcoin. This is why small miners often join mining pools to collaborate and increase their profits.

Two major players in this area are AntPool and Foundry USA, which together own more than 50 percent of the computing power in the network.

According to Stadelmann, these pools form a centralizing power. They benefit from economies of scale and more efficient processes. Even more worrying, however, is that a pool with more than 50 percent of the computing power can perform a 51% attack, which allows them to censor transactions.

Can Bitcoin Overcome This Centralization?

According to Stadelmann, Bitcoin can counter this form of centralization by running as many independent nodes as possible. These nodes can then choose a non-tampered blockchain if there is a 51% attack.

ASIC owners can also set up their devices for smaller mining pools.

The centralization of mining pools is a worrying development according to Stadelmann, but he calls Bitcoin too valuable to let this fail.

By working together, he believes, the Bitcoin community can ensure the freedom of digital gold. What do you think? Is Bitcoin really in danger with the centralization of these mining pools or is Stadelmann exaggerating a bit?

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