Centralization of mining is increasing - Will China soon have a monopoly?
|Matúš Kopalko|source|4413x
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Centralization of mining is increasing - Will China soon have a monopoly?

Centralization is one of the problems that cryptocurrencies were supposed to solve, but also one of the most important problems they still face. Centralization is everywhere. For example, Tether with 119 wallets owning more than 64% of all tokens in circulation, is centralized. Stock exchanges are centralized, too, which makes them susceptible to hacks. Mining is also increasingly becoming centralized, which may pose a problem in the future.



According to a new survey by CoinShares, cryptocurrency mining in China is slowly becoming a big problem mainly because mining is so popular there. Currently, China is the place where up to 65% of all Bitcoin mining is taking place, thus making China the most centralized state in this regard since the CoinShares’ first research into the issue.

Another study from 2018 arrived at a very similar conclusion. Two universities (Princeton and Florida) conducted a survey where they found that up to 74% of all mining was controlled by Chinese mining pools. With regard to this survey, however, it should be noted that mining is only managed by pools and people around the world can join these pools.

The reason for centralization is quite simple. Most of the hardware needed for mining is manufactured in China, which means that buying the hardware is the cheapest there. Likewise, domestic buyers are preferred to foreign buyers, as manufacturers (such as Bitmain or Canaan) want to avoid tariffs.

In addition, the vast majority of mining takes place in the Sichuan region, which is one of the best mining regions. As much as 54% of total BTC mining comes from this region, suggesting a clear cryptocurrency problem. Unless this can be changed, the credibility of cryptocurrencies can be called into question, since decentralization is far from happening.

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