A BanklessTimes.com. data presentation shows that a very small number of miners are reaping the majority of the rewards. According to the website, 10% of Bitcoin miners earn 90% of all block rewards.
This concentration of rewards worries some observers, who fear it could lead to the centralization of Bitcoin mining. If a few large miners control most of the coin’s mining power, they could theoretically game the system or launch a 51% attack on the network.
“Bitcoin is built on the idea of decentralization — but in practice, it is becoming increasingly centralized,” says BanklessTimes CEO Jonathan Merry. He adds, “A small number of large financial institutions have the capital to buy enough ASIC miners, which can cost thousands of dollars each. Consequently, these companies control a large portion of the computing power on the Bitcoin network.”
What is Behind this Centralization of Mining?
Bitcoin’s proof-of-work (PoW) consensus is energy intensive and incentivizes mining as quickly as possible. Mining equipment, too, quickly becomes obsolete. That, too, incentivizes the ability to get existing mining equipment running as soon (and often) as possible over nearly all other considerations.
Also, Bitcoin’s block rewards shrink over time through halving events. With each halving event, the block reward reduces by half. This reduction incentivizes miners to race against each other to validate transactions as quickly as possible.
Environmental Impact of Centralizing BTC Mining
PoW mining is often touted as being a low-cost endeavor. And to the extent miners are constantly searching to lower their energy expenses, that’s true. However, the reality is that miners are often willing to pay premium prices for electricity, provided they can set up their operations quickly.
Consequently, Bitcoin mining in America has been a boon for struggling power plants, as miners are happy to take advantage of any excess or otherwise uneconomic energy source. So the retiring old coal plants allow miners to swoop for excess electricity.
They can get the energy they need cheaply by making deals with these power plants. Given Bitcoin’s volatility, many miners play it safe by sticking with short-term investments that they can quickly recoup if prices dip. This means that, for now, renewable energy sources are unlikely to replace fossil fuels as the primary source of electricity for mining operations. Full story and statistics can be found here: 90% Of All Bitcoin Rewards Are Received by Just 10% Of the Miners