Bitmain Claims Its Hashrate Is Only 4% of Total Bitcoin Mining Power, Critics Disagree

Bitmain, a Beijing-based company which designs and produces bitcoin mining equipment, published on July 22, 2018, its first statistics report on the amount of its in-house mining operation and it’s already caused some controversy.

Bitmain Releases a Suspicious Report

Bitmain said the report was part of its transparency policy for shipping and mining practices on its blog, which pledges to publish regular reports on its in-house hashrate in relation to the total bitcoin mining power. The company promises to update its hashrate disclosure once every 30 days.

According to Bitmain’s entry on transparency, the reason behind this is the fact the company “has started to explore policies and behaviors that aim to increase transparency and foster greater dialogue between us and the cryptocurrency communities at large.”

What is hashrate? A simple answer would be the amount of computing power which nodes (machines performing the mining operations) use for mining bitcoin. The unit of measure for hashrate is one hash per second (1H/s).

Bitmain’s first report, current as of July 22, 2018, says its company-owned mining machines are mining three algorithms: SHA256 (1,692 PH/s), Ethash (339.7 GH/s), and Scrypt (44.2 GH/s).

The company said nothing about which digital tokens it is mining and how it distributes the hashrate. Although, if one were to direct the company’s whole batch of SHA256 ASIC machines at bitcoin, it would mean this hashrate equals to just four percent of the entire network’s hashrate. As a reminder, the current bitcoin network hashrate is 41.83 EH/s.

The company’s critics, of course, accused it of lying and hiding the truth which is, according to them, they actually control the largest portion of the bitcoin mining network, and maybe even of some other blockchains.

Bitmain swears by its zero-tolerance policy against “secret mining”, a criticized practice in which an ASIC manufacturer mines with newly developed equipment prior to selling or distributing such equipment to customers. These cryptocurrency circles have criticized this practice as giving an unfair market advantage to ASIC manufacturers over individual community member miners.

The critics accuse Bitmain of doing exactly this.

According to previous media reports, Bitmain’s hashrate was steadily approaching to 51 percent of the bitcoin network, with reaching 42 percent on June 24, 2018.

Although their operations are independent to Bitmain’s (or so Bitmain claims), it is nevertheless interesting the Bitmain-owned BTC.com and Antpool released statistics on their mining activity in June 2018, stating clearly they had mined over 27.2 percent and 14.6 percent of the network’s blocks respectively. This meant their parent company had influence over at least 42 percent of the bitcoin hashrate.

It is quite conflicting information in comparison to Bitcoin’s newest report.

These companies also mined a total of over 21 percent of bitcoin cash, the controversial bitcoin hard-fork operating on the same algorithm (SHA256) as bitcoin, with Antpool controlling 10.6 percent and BTC.com controlling over 10.4 percent.

Is Bitcoin in Danger from a 51 Percent Attack?

These statistics could potentially be damaging for Bitmain, as reaching the 51 percent mark would make it vulnerable to accusations of attempting a 51 percent attack against the network.

The 51 percent attack refers to a situation in which a group of miners is controlling more than 50 percent of a network’s mining hashrate, allowing them to attempt a hypothetical “attack” by preventing new transactions from gaining confirmations, allowing them to stop payments between some or all users. They would also be able to reverse transactions completed while they were in control of the network, meaning they could double-spend coins.

At least five cryptocurrencies have recently experienced such an attack in May 2018, including bitcoin gold, monacoin, verge, litecoin cash, and zencash. In each of those cases, attackers gathered enough computing power to compromise the networks, rearrange their transactions, and get out with millions of dollars.

The chance of Bitmain launching such an attack is miniscule, or at least there is no evidence they are planning to those. But the fact this is a subject of discussion at all is what worries the critics who say bitcoin mining has become too centralized.

One man is trying to find a solution to this centralization. Bitcoin Core developer Matt Corallo has created “BetterHash,” a draft proposal which aims to decentralize bitcoin mining.

Corallo proposes replacing Stratum, the current bitcoin mining protocol, with two new protocols. This would allow each miner to construct their own block templates or choose one from a third party instead of having to use the one chosen by the operator of the mining pool at which they direct their hashrate.

This would give miners more autonomy and reduce the chance of malicious mining pool operators using their position to attack the network.

Featured image 

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.