With ~90% of blocks solved by 10 pools, is Bitcoin really decentralized anymore?

[drmadison]

Honest question... we have 10 pools making up like 90% of solved blocks according to https://www.buybitcoinworldwide.com/mining/pools/ and https://www.blockchain.com/pools (not sure the validity of these, but they seem to agree).
But even if it's not QUITE that desperate, with the mega-mines making up the vast majority of hashrate, and the effective impossibility of the "casual home miner" to even mine at a break-even rate, how is this really decentralized anymore?
I came in when it was CPU and then GPU mining. Anyone could start mining and make a small amount of bitcoin, and it wouldn't cost thousands in electricity, it really felt like it was "the people's" but now it's just giant corporations that control it all.

A few things first - yes, I know there are altcoins but this is about Bitcoin specifically. And yes I know some of the hashrate of those huge pools are made up of individual miners, but I'm willing to bet it's a very small fraction.

So all that being said...
1) Is this as concerning to anyone else as it is to me in terms of the future of Bitcoin
2) Is there a possible future that I'm not seeing right now where it goes back into the hands of thousands / millions of people around the world who each have a meaningful share
    2.a) When I say meaningful share I mean in relation to each other, not the overall
    2.b) Right now, the disparity in hashrate is nearly as bad as the disparity in wealth we already have in the world
3) Right now there are ~900 bitcoins mined a day (please check me on that number if I'm misremembering the math) and transactions only add ~15 to that. Do we expect an order of magnitude rise in transactions / transaction fees (which have already risen and greatly reduced the use of bitcoin as a means of cheap money transfer) to magically happen?
4) How does that happen when a majority of bitcoin are held in exchange/wallet services cold wallets and so likewise very centralized (and transfers between users on those services don't go through the blockchain)?

I realize maybe this sounds all doom and gloom, I'm just honestly curious how others feel about all this. I see time and again people touting how Bitcoin will survive because it's decentralized, but as you can see above, it's really not.
It was designed to be, and has the ability to be, but that's not the same as actually being...

[avikz]

Honest question... we have 10 pools making up like 90% of solved blocks according to https://www.buybitcoinworldwide.com/mining/pools/ and https://www.blockchain.com/pools (not sure the validity of these, but they seem to agree).
But even if it's not QUITE that desperate, with the mega-mines making up the vast majority of hashrate, and the effective impossibility of the "casual home miner" to even mine at a break-even rate, how is this really decentralized anymore?

First you need to understand what is a mining pool. It's not a mining company with thousands of mining rigs working at its backyard. A simple illustration of a mining pool is below,



It consists of thousands of individual or corporate miners of all sizes. The form up together so that they can have a better chance of finding a block. They don't change the rules of the bitcoin network.

I came in when it was CPU and then GPU mining. Anyone could start mining and make a small amount of bitcoin, and it wouldn't cost thousands in electricity, it really felt like it was "the people's" but now it's just giant corporations that control it all.

A few things first - yes, I know there are altcoins but this is about Bitcoin specifically. And yes I know some of the hashrate of those huge pools are made up of individual miners, but I'm willing to bet it's a very small fraction.

I thought so! However, there are home miners who have successfully ramped-up their mining operation to cope-up with the increasing difficulty. Also we have a group of ex-miners who couldn't ramp-up their operations due to various reasons and fallen out of the league. That certainly doesn't mean that the bitcoin network is becoming centralized.

I believe mining pools are providing better chance to small miners to earn some rewards at least. If mining pools were never existed, the small miners wouldn't have a chance to earn mining rewards at all. Re-think the opportunity!

[Kakmakr]

Nah, not worried at all about this.    I am a individual miners and I mine through a mining Pool as 1000's of other miners are doing. So, even if 10 mining pools have the support of 1000's of small miners, they still do not own the hash power being used.

Those miners can split away from mining pools if they do not agree with their decisions and policies and other people are free to mine on their own. It is not like the farming industry in the USA, where smaller farms are being bought by the large corporations and these smaller farms has no say in the matter. 

We saw what happened when GHash.IO briefly controlled more than 51% of bitcoin's computinhg power in 2014 .... miners just left it to join other mining pools to break that control. 

[drmadison]

I'm well aware of how pools work.
But Most of the hashrate ON those pools is provided by a very small number of very large mining operations. Yes there are thousands of smaller miners also but their contributions are comparatively minute.
And yes some people are able to mine from home still, but like you said it's a smaller number, and they're having to step up their own operations quite a bit.

I guess that was my point. Anyone can't just mine and have it be profitable anymore. An average person can't just decide they want to be a part of this and start mining bitcoin (and see any kind of real result) without it requiring significant investment, and living in the right place with the right electricity rates.

Maybe I'm just old and nostalgic for the olden days when you could fill up a USB hub with USB stick miners and have it feel meaningful.
On the other hand, it's pretty cool that this has been going on long enough to feel nostalgic about!

[btc_angela]

I'm well aware of how pools work.
But Most of the hashrate ON those pools is provided by a very small number of very large mining operations. Yes there are thousands of smaller miners also but their contributions are comparatively minute.
And yes some people are able to mine from home still, but like you said it's a smaller number, and they're having to step up their own operations quite a bit.

I think it is pretty obvious that if you are a average Joe and solo mining, then it is no longer profitable even if you step up your operations. You need to have new mining rigs and cheap electricity of course. And I'm not sure if. there are still mining bitcoin by themselves in 2018-2019, your financial metric is close to 0.

Maybe I'm just old and nostalgic for the olden days when you could fill up a USB hub with USB stick miners and have it feel meaningful.
On the other hand, it's pretty cool that this has been going on long enough to feel nostalgic about!

I guess you are mate, those where the days when someone can really mine. As bitcoin grows and so is the difficulty in mining.

[pooya87]

I guess that was my point. Anyone can't just mine and have it be profitable anymore. An average person can't just decide they want to be a part of this and start mining bitcoin (and see any kind of real result) without it requiring significant investment, and living in the right place with the right electricity rates.

why do you think that? nobody is stopping anybody else from making that kind of investment and taking the risks that the numerous miners have been taking and mine bitcoin. it is not an exclusive market that they wouldn't sell you ASICs. i think your problem is that you don't want to make that kind of commitment and instead prefer to take the least amount of risk (not buy any new equipment that is ASIC and use what you already have which is a PC) and make the most reward. well that's not going to work. in fact part of the security of bitcoin is ensured because of that. in some ways this is making sure miners are committed to the work they are doing.
the investment is not that significant as you think either. the range of ASIC prices is usually between $1000-$2000 and considering the fact that you would be mining the only decentralized and the most valuable currency in the world, i'd say it is a cheap price to pay.

[Wind_FURY]

OP, mining is cartelized towards the biggest mining farms, but the network itself is still decentralized/censorship resistant, thanks to the people around the world who continue to run/maintain their full nodes. More full nodes = more security.

[liverpool52]

As a rule, mining is now not profitable even if you buy a bunch of miners. It has long been known for the fact that you won’t have time for the price, it will always fall, as will the power with the release of new devices.

[Velkro]

Honest question... we have 10 pools making up like 90% of solved blocks according to https://www.buybitcoinworldwide.com/mining/pools/ and https://www.blockchain.com/pools (not sure the validity of these, but they seem to agree).

You forget most important thing. Its pools, its not entities like companies.
If one pool will behave malicious to Bitcoin, everyone will leave it and go with their hash power to other pools.

One real concern is if someone has huge mining operation its easier for him to scale his operation and cut costs while small miners can't do that. Big miners will grow, small will stay small.
Similiar to small companies vs corporations (big companies). No easy way to do smth about it here.

[drmadison]

OP, mining is cartelized towards the biggest mining farms, but the network itself is still decentralized/censorship resistant, thanks to the people around the world who continue to run/maintain their full nodes. More full nodes = more security.

This I guess was my point - there's this "cartel" of big mines that effectively verify all the money. Those full nodes just keep a record of it. So there's still a small number of entities (these large mines) that have the control over bitcoin's transfer. You can't send or receive bitcoin unless one of these big mines agrees that you did by putting it in a block. If they all went away yes the small miners would pick up the slack, but odds are (statistically speaking) it's one of these few big mines verifying everything.

We've repeated the same mistakes already made with the rest of the economy. Walmart killed the local stores. Chain restaurants killed the local cafes. Big mines killed the ability to mine.

[BrewMaster]

there's this "cartel" of big mines that effectively verify all the money. Those full nodes just keep a record of it.

first of all why do you use the term "cartel" here?
secondly miners do NOT verify anything. they are only performing a tedious task of computing hashes. it is the nodes that verify transactions.

You can't send or receive bitcoin unless one of these big mines agrees that you did by putting it in a block.

if a miner rejects a transaction, another one picks it up. if a pool rejects a transaction then miners leave that pool for another one. if things get bad and a large number of miners turn malicious the nodes would create a fork and turn their millions of dollars investment into bricks by changing the mining algorithm.
in other words miners are kept in line by the nodes.

[drmadison]

there's this "cartel" of big mines that effectively verify all the money. Those full nodes just keep a record of it.

first of all why do you use the term "cartel" here?
secondly miners do NOT verify anything. they are only performing a tedious task of computing hashes. it is the nodes that verify transactions.

You can't send or receive bitcoin unless one of these big mines agrees that you did by putting it in a block.

if a miner rejects a transaction, another one picks it up. if a pool rejects a transaction then miners leave that pool for another one. if things get bad and a large number of miners turn malicious the nodes would create a fork and turn their millions of dollars investment into bricks by changing the mining algorithm.
in other words miners are kept in line by the nodes.

I was quoting someone else who stated that mining is "cartelized" - was simply sticking with the wording they used.
It's the miner's who are completing blocks and therefore stamping transactions as part of the "permanent record" so to speak.

Like you said, right now if a pool proves to be malicious (or even gets too powerful, as we've seen in the past) then the smaller miners can choose to jump ship to another pool. As mining continues to have higher and higher requirements due to the ever-rising difficulty and the proliferation of these mega-mines, there are fewer and fewer who can make that decision to change in any meaningful way.

[DarkDays]

Each pool is comprised of tens of thousands of miners... So I'd say it's still decentralized.

Just because ten pools are used to collate their hashing power, doesn't mean that they are somehow centralized, it's just pure economics at this point. Few miners have the mining hardware capable of successfully discovering a block in reasonable time, so the only alternative is to join a pool and split the reward.

It's like comparing these mining pools to individual hardware manufacturers. Antminer, Avalon, Bitmain etc. Just because 70% of miners are using Bitmain, does that mean it's centralized? The answer is no, because each miner still has their own capacity to choose what they want to do if it ever came down to it.

Still, I would like to see more pools.

[thecodebear]

Pools themselves are decentralized. Members of a pool can switch at any time. So, yes, Bitcoin is highly decentralized.

[drmadison]

I think that by starting the topic about the pools I derailed my own point before I got a chance to make it, and hey that's on me.

Ignoring pools, who really owns most of the hashrate out there? Is it these 10,000 individual miners (I question how many their actually are, I'd love to see numbers if anyone has done the research there...)?
Or is it say,  10, or 20, or 100 huge mines? That was the point I'm trying to make. Even if there are 10,000 people all mining at home, their entire combined hashrate is likely today (and certainly in the future as difficulty and power requirements go up and margin continues to go down) a rounding error in the scale of total hashrate.

[Wind_FURY]

OP, mining is cartelized towards the biggest mining farms, but the network itself is still decentralized/censorship resistant, thanks to the people around the world who continue to run/maintain their full nodes. More full nodes = more security.

This I guess was my point - there's this "cartel" of big mines that effectively verify all the money.

You misunderstand. Miners don't "verify all the money" because they are miners, it's because they're full nodes. Some miners don't run full nodes, they connect to a mining pool.

Those full nodes just keep a record of it. So there's still a small number of entities (these large mines) that have the control over bitcoin's transfer. You can't send or receive bitcoin unless one of these big mines agrees that you did by putting it in a block. If they all went away yes the small miners would pick up the slack, but odds are (statistically speaking) it's one of these few big mines verifying everything.

This is true under a 51% attack. Under cartelization conditions, I dare them to try. They would just be hurting themselves, and their mining farms.

Plus in fact, it could be debated that it's the full nodes that define what miners are.

We've repeated the same mistakes already made with the rest of the economy. Walmart killed the local stores. Chain restaurants killed the local cafes. Big mines killed the ability to mine.

Wallmart and Bitcoin miners, simply not a good comparison in my opinion.

[drmadison]

Wallmart and Bitcoin miners, simply not a good comparison in my opinion.

A big business that leverage the economies of scale and efficiencies that can only be gotten by being global, massive, and having a huge backing to make it impossible for smaller operations to function or profit?
Seems like a pretty good comparison...

[hatshepsut93]

Bitcoin doesn't rely on mining being decentralized in order to protect itself against attacks, it makes attacks extremely expensive thanks to proof of fork, and the kinds of damage that attacks can do are very limited because of the network of validating nodes, and the blockchain and its rules. So, it's not only a question if one entity can get 51% of the hashpower, it's the question why would anyone want to waste millions of dollars per day without causing any long-lasting damage to Bitcoin's protocol.

[franky1]

miners cannot change the rules. they can only select which transactions to include.
..
with that said yes in CPU days it was fully decentralised. . but even in GPU days pools popped up. i remember in 2012 when there was only like 3 pools. so more than 10 is an improvement.

also these large pools are not made up of just one facility with one manager.
even antpool is made up of sub farms around the word in many facilities with many managers. and they pool hop if things get too over the top

its worked out that there is about 80exa of 'farms' and upto 60exa of smaller groups. which is why you see the hashrate peak at 140exa but drop to 80-90exa because hobby miners are jumping in and out at a whim.

...
what should be more concerning is back in 2009-2017 people were making their own nodes. they tweaked them for their own personal needs. like blockchain.info tweaked their backend node to allow for studying and storing blockchain data in different formats.

however these days we are stuck with just one main source of codebase and that main source has become the omni powerhouse of what new rules are allowed.
the codebase has lost more of its 'decentralisation'

[drmadison]

its worked out that there is about 80exa of 'farms' and upto 60exa of smaller groups. which is why you see the hashrate peak at 140exa but drop to 80-90exa because hobby miners are jumping in and out at a whim.

Overall a great response thank you. And that quote right there ^ is exactly the kind of thing I was curious about.  Assuming accuracy, that means that really only about 60% (rough number at that 140exa) is actually these few big mines that I was referencing, and almost 40% is made up of much smaller. Assuming those numbers are correct, that paints a much better picture than what's easily assumed these days. Thank you again!