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Eleven years ago, Bitcoin Space was working on balloon hashrates for one extremely popular mining pool, ghash.io.
Owned by cex.io (an exchange still operating today), Ghash was widely considered the best mining pool in 2014. There were auto-payments and super low fees, and we shared transaction fees with the entire pool, but others tended to keep them on their own.
It also had a clear and responsive tool to track hashrates and revenue, supporting more merge tier coins than any other pool. Users can also trade hashrates and mining contracts via the CEX.IO platform.
One problem: Ghash attracted too many miners.
“The people behind Ghash are Mark Zuckerberg mining for social networking,” wrote one Reddit user. “Without a 50% concern, they’d have over 90% of the pooled network.”
Bitcointalk users were sounding an alarm. “Ghash is 48% WTF. This is fucking serious people getting down. The 51% outcome is huge. Bitcoin will continue to be harmful.
Discusfish, the second most powerful pool at the time, only had 11% of the total hashrate.
“Bitcoin Pirates with Ddos Botnets” is a great name for a punk band.
It was also the second time that Ghash’s popularity became a problem in six months. After collecting 42% of the hashrate, the pool has released a memo indicating that it will restrict registration of new miners, pledging to help existing users diversify into other pools. Many miners left Ghash and reverted their hashrate share to 38% within a day.
So, by the time Ghash hashrate swelled to 50% multiple times after one week, five months, it was up to Bitfury to significantly expand the pooled operations, starting at 1 PH/s (about 1% of the total hashrate), followed by more than 72 hours of petahash. Ghash’s influence disappeared in the next six months and was completely closed by early 2015.
Of course, Bitcoin is best when you don’t control entities that are nearly half the hashrate. It doesn’t matter whether it’s a mining pool consisting of thousands of individual miners or a multi-billion dollar mining giant.
At the technical level, the risk of malicious double spending is clear. In the real world, these types of situations tend to be temporary branding issues, and the ecosystem has historically mitigated problems quickly enough.
Panic spreads to mainstream media, Reflection Concerns from some BitCointAlk users.
Recently, three mining pools with more than half of the three hashrates have fulfilled more than half of the casting, ant pool, VIABTC or F2pool.
Is that better than 2014? surely. But that might still be good. Alejandro de La Torre, CEO and co-founder of Pool Dmnd, says the issue is not necessarily a potential conspiracy issue. This means that the mining pool itself is building a bitcoin block rather than the individual miners in the pool.
“Everything is dispersed except for blocks. Let’s say the top five players have built more than 80% of the blocks. These top five players are in the US and the other half are in China.
De La Torre worries that such measures will be very easy for the government. That means knocking on the door of the top mining pool operator. “This is a huge risk for Bitcoin and is currently the biggest risk for Bitcoin.”