Bitcoin's Hashrate Control: A Nuanced Issue
Crypto analyst Chris Blec recently raised an alarm about the dominance of two major mining pools in Bitcoin, which now control more than half of the network's total hashrate. Blec suggests that this level of control could lead to the transformation of bitcoin mining into a regulated industry, where all miners would be required to adhere to Know Your Customer (KYC) guidelines.
At present, Antpool is the leading mining pool with a 30% share of Bitcoin's total hashrate, closely followed by Foundry USA with a 26% share. Together, these pools exert a 56% influence over the network's hashrate of 468 exahash per second (EH/s). Chris Blec, a respected figure in the crypto research community, expressed his concerns on the social media platform X this Wednesday. Highlighting the gravity of the situation, Blec stated, "It's important," and emphasized that his disclosure reflects reality, not FUD (Fear, Uncertainty, and Doubt).
"The two largest bitcoin mining pools, which have controlled over 50% of the hashrate for more than a year now, are regulatory-compliant and require all miners to comply with KYC," Blec said. "The government has clear identification, visibility, and control over more than 50% of Bitcoin's miners (by hashrate)." The researcher added that the government can make demands of these individuals and companies, and they would be required to comply. As this trend continues, Bitcoin's decentralization and game theory will both be negatively impacted.
The Debate: Centralization vs. Individual Miner Autonomy
Past data from a few years ago shows a more diverse landscape of dominant mining pools. Following Blec's remarks, there was a flurry of responses. Jon Black countered, suggesting that these two pools only hold 51% of the hashrate because they are currently behaving. He speculated that any misconduct would prompt a shift in hashrate to smaller, non-KYC compliant pools. Blec dismissed this idea as "completely theoretical."
Harry Beckwith then addressed Blec, stating that while he appreciated the concerns, Blec was portraying mining pools as monolithic entities when they are not. Beckwith said, "They function like a co-op, and individual miners have the freedom to choose their own path if they disagree with the direction of the co-op."
Beckwith's argument has become a significant talking point in this ongoing debate, considering the complex nature of hashrate control. Under Stratum mining software version one (v1), pool operators handle the pool's infrastructure and decide on the transactions for mining blocks. Individual miners, while contributing their computational power, do not directly influence how this collective power is utilized. They primarily provide the necessary resources. However, their potential to migrate to other pools if dissatisfied does play a role in the dynamics of the co-op.
The introduction of Stratum version two (v2) brought about a notable change. It introduced "Job Negotiation," which empowers individual miners to select transactions for their block templates, thereby reducing the influence of pool operators on block contents. However, most pools continue to use Stratum v1, although alternatives like Stratum-mining and BraiinsOS/BraiinsOS+ offer Stratum v2.
A report from Galaxy.com in 2022 notes that miners prefer v1 due to its ease of adoption, while a comprehensive Stratum full feature set is still under development. The report highlights a critical division within the industry: the differing desires of ASIC manufacturers and developers. "The challenges of getting ASIC manufacturers to include Stratum v2 into their firmware reveal an interesting dynamic at play: the mining industry is divided between what the manufacturers want and what the developers want," detail the researchers at Galaxy.
This division underscores the validity of concerns regarding mining centralization. Galaxy researchers further emphasize that Stratum v1 "is not designed for the high hashrate levels we experience today." In the meantime, while bitcoin mining pools maintain their current conduct, critics like Chris Blec argue that this alone is insufficient.
What are your thoughts on Chris Blec's argument regarding mining centralization? Feel free to share your opinions in the comments section below.
Frequently Asked Questions
How Does Gold Perform as an Investment?
Supply and demand determine the gold price. Interest rates are also a factor.
Because of their limited supply, gold prices can fluctuate. Physical gold is not always in stock.
How much should you have of gold in your portfolio
The amount you make will depend on the amount of capital you have. For a small start, $5k to $10k is a good range. As you grow, it is possible to rent desks or office space. You don't need to worry about paying rent every month. You only pay one month.
Consider what type of business your company will be running. In my case, I am running a website creation company, so we charge clients around $1000-2000/month depending on what they order. This is why you should consider what you expect from each client if you're doing this kind of thing.
Because freelance work pays freelancers, you won't likely get a monthly income if you do freelance work. Therefore, you might only get paid one time every six months.
You need to determine what kind or income you want before you decide how much of it you will need.
I would recommend that you start with $1k-2k worth of gold and then increase your wealth.
Can I keep a Gold ETF in a Roth IRA
A 401(k) plan may not offer this option, but you should consider other options, such as an Individual Retirement Account (IRA).
A traditional IRA allows for contributions from both employer and employee. Another option is to invest in publicly traded corporations with an Employee Stockownership Plan (ESOP).
An ESOP is a tax-saving tool because employees have a share of company stock as well as the profits that the business generates. The money in the ESOP can then be subject to lower tax rates than if the money were in the individual's hands.
An Individual Retirement Annuity (IRA) is also available. With an IRA, you make regular payments to yourself throughout your lifetime and receive income during retirement. Contributions to IRAs don't have to be taxable
What tax is gold subject in an IRA
The fair market value of gold sold is the basis for tax. You don't have tax to pay when you buy or sell gold. It is not considered income. If you decide to make a sale of it, you'll be entitled to a taxable loss if the value goes up.
You can use gold as collateral to secure loans. Lenders seek to get the best return when you borrow against your assets. Selling gold is usually the best option. The lender might not do this. They may just keep it. They might decide to sell it. In either case, you risk losing potential profits.
So to avoid losing money, you should only lend against your gold if you plan to use it as collateral. It's better to keep it alone.
How much of your portfolio should be in precious metals?
To answer this question, we must first understand what precious metals are. Precious elements are those elements which have a high price relative to other commodities. This makes them very valuable in terms of trading and investment. Gold is currently the most widely traded precious metal.
There are however many other types, including silver, and platinum. The price of gold fluctuates, but it generally remains stable during times of economic turmoil. It is also unaffected significantly by inflation and Deflation.
The general trend is for precious metals to increase in price with the overall market. However, they may not always move in synchrony with each other. For example, when the economy is doing poorly, the price of gold typically rises while the prices of other precious metals tend to fall. Investors expect lower interest rate, making bonds less appealing investments.
However, when an economy is strong, the reverse effect occurs. Investors favor safe assets like Treasury Bonds, and less precious metals. Since these are scarce, they become more expensive and decrease in value.
Diversifying across precious metals is a great way to maximize your investment returns. Because precious metals prices are subject to fluctuations, it is best to invest across multiple precious metal types, rather than focusing on one.
How does a gold IRA work?
For people who are looking to invest in precious materials, Gold Ira account accounts provide tax-free investments.
Physical gold bullion coin can be purchased at any time. To invest in gold, you don't need to wait for retirement.
An IRA allows you to keep your gold forever. Your gold holdings won't be subject to taxes when you pass away.
Your gold will be passed on to your heirs, without you having to pay capital gains taxes. Your gold is not part of your estate and you don't have to include it in the final estate report.
First, an individual retirement account will be set up to allow you to open a golden IRA. After you do this, you will be granted an IRA custodian. This company acts in the role of a middleman between your IRS agent and you.
Your gold IRA custodian is responsible for handling all paperwork and submitting the required forms to the IRS. This includes filing annual reports.
Once you've set up your gold IRA, it's possible to buy gold bullion. Minimum deposit is $1,000 The minimum deposit is $1,000. However, you will receive a higher percentage of interest if your deposit is greater.
Taxes will apply to gold that you take out of an IRA. You will be liable for income taxes and penalties if you take the entire amount.
A small percentage may mean that you don't have to pay taxes. There are exceptions. However, there are exceptions. If you take 30% or more of your total IRA asset, you'll owe federal Income Taxes plus a 20% penalty.
It is best to not take out more than 50% annually of your total IRA assets. Otherwise, you'll face steep financial consequences.
Statistics
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
External Links
finance.yahoo.com
cftc.gov
law.cornell.edu
- 7 U.S. Code SS 7 – Designation of boards of trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement plans
forbes.com
- Gold IRA, Add Sparkle to Your Retirement Nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
How To
Tips to Invest in Gold
Investing in Gold is a popular investment strategy. This is due to the many benefits of investing in gold. There are many ways to invest gold. Some people purchase physical gold coins. Others prefer to invest their money in gold ETFs.
You should consider some things before you decide to purchase any type of gold.
- First, make sure you check if your country allows you own gold. If the answer is yes, you can go ahead. Otherwise, you can look into buying gold from abroad.
- You should also know the type of gold coin that you desire. You can choose between yellow gold and white gold as well as rose gold.
- Thirdly, it is important to take into account the gold price. It is best to start small and work your way up. Diversifying your portfolio is a key thing to remember when purchasing gold. Diversify your investments in stocks, bonds or real estate.
- Remember that gold prices are subject to change regularly. You need to keep up with current trends.
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By: Jamie Redman
Title: Critics Concerned as Two Major Mining Pools Control Over 50% of Bitcoin Hashrate
Sourced From: news.bitcoin.com/critics-alarmed-as-2-major-mining-pools-dominate-over-50-of-bitcoin-hashrate/
Published Date: Thu, 16 Nov 2023 19:00:57 +0000
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