This isn’t the first time the Bitcoin Cash network is being accused of being too centralized. Last, year, after the Bitcoin Cash stress test, a developer known as Bitpico said that 98% of the total BCH nodes in circulation were on the same server rack that left the network vulnerable to security threats and seizures.
Over 50% Bitcoin Cash (BCH) Hashrate Comes From A Single Mining Pool
According to the research conducted by the cryptocurrency statistics service, a China-based Bitcoin mining pool called BTC.TOP, makes up for 50.2% of the entire BCH hashrate. Major mining pools like BTC.com, Bitcoin.com, AntPool, PH/s, didn’t come near BTC.TOP at some point today. While this significant increase during the day may have been nothing more than a variance, it threatens the decentralisation of the BTC network. Imagine a situation where the mining pool decides to attack the entire network.
Also, Microsoft’s Alex Simons discovered that increasing block size by the Bitcoin Cash team made the system less decentralised than it should be. In his words:“Some blockchain development teams have increased block size but this method makes a blockchain vulnerable to centralization. This is because the network will be unable to reach the required number of transactions per second.”
Bitcoin mining is an integral part of the entire system. The Bitcoins in circulation were mined mainly in mining pools. Normally, individual miners are allowed to mine Bitcoin or Bitcoin Cash solely from the comfort of their home. In recent time, however, joining mining pools have become the most popular way to get rewards on the blockchain. The higher the the number of miners and mining pools are on a blockchain, the lower the chances of centralization.
What This Means For Bitcoin Cash
A key aspect of all decentralised blockchains is its ability to protect the system from central control. Without such protection, malicious entities can combine mining output and form a stable coalition. This, in turn, can prevent transaction confirmation. With such power, these malicious parties can go as far as reversing transactions that have already been confirmed. On an entirely different note, they may be able to double spend at will.
In 2018, for example, there was a 51% attack on the Bitcoin Gold network. Here, the bad actors kept double spending their Bitcoin Gold tokens for days. Eventually, they were able to steal $18 million in tokens. Shift, and Krypton, Ethereum-based cryptocurrency exchanges, also suffered similar attacks on their platforms.
Typically, when a mining pool crosses the 50% hashrate unintentionally, its miners voluntarily reduce their computing power so that other mining pools can share the hashrate preventing the said exchange from having the power to attack the network. For example, in July 2014, GHash.io had to reduce its computing power from 50% to 40% following negative comments from the cryptocurrency community.
A good way for BTC.TOP to avoid negative comments and reviews as well as maintain the peace within the BCH community would be follow the example of GHash.io. Giving up some of its hashpower will help prevent a chain reaction that will eventually cost the BCH network investors.