As we all know that anyone with a computer could manufacture a coin by connecting to the mining network. More precisely the large mining pools with operations spread across multiple countries have become a standard method for minting new coins.

In a recent study the bitcoin and ethereum are regarded as two most prominent cryptocurrencies, which have centralized mining operations. The top four miners in bitcoin and the top three miners in ethereum professionally accounted for more than 50% of the overall hash rate for those cryptocurrencies.

It is also noted 56% of all bitcoin is mined in datacenters. For ethereum, the same figure is 28%. In addition the three miners of ethereum accounted for 61% of average weekly capacity.

Merits of Mining Pools

The major merit one is faster processing wherein bitcoin mining, each node competes with the rest of the network to add to the overall blockchain. The Blocks are found only when other nodes within the network agree to its discovery. So having multiple blocks within the same network could actively speed up the discovery process since it reduces latency or delays. Also more direct network connections between bitcoin nodes speeds up the notification process.

The other advantage being large numbers of mining systems within the same network also makes for an effective mining process since it reduces the number of “orphan blocks,” or blocks which are not selected to be part of the blockchain.

Primarily pools also assist bitcoin mining firms achieve economies of scale. The main problem would be that miners must solve in order to earn bitcoin has increased over time and is expected to further increase as the rate of production of bitcoin slows down.

The introduction of new ASIC hardware machines might make the process more effective. According to some studies, high electricity prices could also make bitcoin prices unsustainable over the long run. 

Centralization Lead to More Power

In this kind of mining, a group of miners join forces and hide their generated blocks from the main blockchain. This actually enables nodes within their network to discover the blocks and immediately generate additional blocks. The hidden blocks are revealed only after the hidden chain of blocks has a length equal to that of the new blockchain. The profits developed as a result of this kind of mining which provide incentives for small mining groups to join large ones. They could also control supply of coins to the market; centralized mining pools can control its prices by restricting the number of coins available for trading.

Bottom Line

In conclusion Cryptocurrency mining has actually transitioned from an operation that was wholly distributed over groups of individual computers to centralized mining pools comprising large investments and industrial outfits. The change is primarily a result of the cryptocurrency’s familiarity and increase in transaction volumes. You could cherish numerous benefits and to centralization of bitcoin mining pools.