There’s good news for today’s cryptocurrency market in a report released today by Canaccord, a Canadian wealth management company taking a look at the current state of crypto coins. It talks about the decentralization of cryptocurrencies – and that’s a good thing.
“Canaccord, which tracks the blockchain and digital currency sectors along with its other financial operations, highlighted the increasingly wide distribution of Bitcoin’s hash rate over the past five years,” William Suberg writes today at Cointelegraph.
The idea of decentralization is critically important to cryptocurrencies and the communities that promote them. That’s supposed to be part of the coin’s raison d’être – the transparency and decentralized control that they offer, in contrast to national fiat currencies that are closely controlled by national central banks.
However, in past years, there have been some concerns about centralized Bitcoin mining and other cryptocurrency activity that constitutes “centralization,” a reversal of that key principle that has set coins apart.
Suberg’s reporting cites 2014 numbers, where mining pool Ghash.io accounted for over half of Bitcoin mining.
As reported, at that time, other investors started to become worried about a 51% attack – the idea that a single pool with over 50% of holdings could actually legitimatize fraudulent transactions or otherwise manipulate the market in order to profit at everyone else’s expense.
Coming out of that concern about 51% attacks, there was the broad consensus that no pool should ever have more than 50% of mining control or mining share.
The good news is that Suberg has reported that now the biggest single stakeholder is at 19%, and that’s Bitmain’s Antpool.
That means that we are solidly in the safety zone when it comes to preventing the kinds of oligarchical 51% attacks that Bitcoin egalitarians are so concerned about. This, plus other factors, has rendered a 51% attack on Bitcoin pretty impractical.
“Such an intrusion would not only require a massive amount of computing potential but would also result in minimal financial gains,” wrote Osato Avan-Nomayo at Bitcoinist this past November, citing the research of Professor Saravanan Vijayakumaran, an Associate Professor of the Department of Electrical Engineering at the Indian Institute of Technology (IIT) Bombay. “An attacker would only be able to insert or remove transactions but not alter transactions or steal Bitcoin. … (however) a hostile nation could, in theory, launch such an attack successfully.”
But although we can sleep tight against the idea of a 51% attack, that doesn’t mean that there aren’t other kinds of real threats to decentralized coin activity. Keep an eye out here as we continue to dig into some of the most likely scenarios with Bitcoin and the full range of lesser coins.