March 15, 2023 • 22 min read
Executive Summary
One of bitcoin’s main value propositions is its decentralized nature. However, decentralization only comes when there are enough disparate participants on the network. One major group of participants in the Bitcoin network are miners — those that consume electricity and contribute computing power to help secure the network. Individuals or entities like mining companies often band together to form “mining pools.”
Today, two mining pools control more than 50% of Bitcoin’s total hash rate. This raises concerns of increasing centralization and potential censorship from mining pool operators.1 In this research article, we explore why we think this is unlikely to be a persisting issue because of Bitcoin’s incentive structure, how mining pools work, and new mining protocols on the horizon that could reshape how we think of mining pools entirely.
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