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Global Mining: 51% Attack. The End of Decentralization

Daniil Danchenko

Recently great state of Washington voiced out sad news for the miners. Grand County decided to raise the energy tariffs for the crypto miners.  The local government chose to listen to it because of the fact that local energy suppliers are worried that miners that got into the region because of the low-low tariffs on energy will break the energy distribution balance in the regional power grids and drag the system out of balance.

Also, that's not all - overall mining is losing its profitability, which in turn forces companies to take controversial measures to stay afloat. This, in turn, makes one think about another unfair tool at the disposal of the miners that they can use to manipulate the market. So-called 51% attack.

What is there in this “51% attack” that makes it so scary? It basically means one dire “sickness” that plagues cryo, without discriminating between the rich and those who make the first steps in the world of crypto, critical and incurable one. When a mining pool has enough calculation power - they can just outright “kill” any rival crypto at the start. Despite CZ’s words that “Crypto is large enough for everyone” - very few are interested in genuine competition and prefer to play dirty.

Moreover, that is not only about those who are making their first, “baby steps” between the running “bulls” and “bears.” Bitcoin can be affected just as well, which is very dangerous because bitcoin dictates the rules on the cryptomarket. Theoretically this is impossible, due to the high computational requirements, but back in 2014 it happened for the first time. Ghash.io managed to gather 55% of the hashrate, but they voluntarily rerouted their power into the other pools to avoid any controversies.

However, right now, even in theory, no one on the market can perform the dreaded 51% Attack. Even the biggest companies on the today’s market can’t boast the same computational power as Ghash.io used to have. All of them have a mere fraction of that number.

But there is a catch - god emperor of the mining world, Bitmain, quite possibly have more than 51% of the overall bitcoin hashrate already.

So monopoly like this reminds many practitioners about the dreaded dotcom bubble. Basically, because Bitmain already “owns” the majority share of the computational power they can dictate all the rules - for example, they would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or even all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins and a few other things.

So the bitter irony lies in the fact that the future of the decentralized economy ended up in the hands of the two people. Micree Zhan and Jihan Wu hold the keys to the company, as they own 60% of the Bitmain. And considering the fact that some people say that preventing 51% attack is not possible, it might be a good point to start panicking.

Or be reasonable instead and think about other facts. Yes, Bitmain can easily double their money by merely performing the double-spending attack. So, there is no way to defend bitcoin. All the aces stay on the hands of the bitcoin juggernaut Bitmain. This was not the original Satoshi intention when he was making bitcoin. Maybe it’s better to just sell off everything and forget it like a feverish dream?

Perhaps. But perhaps not. Only because of the fact that Bitmain is planning an IPO, one of the rarest occurrences in the world of crypto. Simply because very-very few companies are able even to get close to the list of requirements of the IPO.

Sure, they could earn a lot and right away, but Bitmain can count their money. Odd that mining as it is is pretty much dead. The fact that NVIDIA bailed from the market because of the lack of profit is a clear indication. Bitmain is not going for the “Money, right here, right now” because they can get more if they play along for now. And after the IPO their shareholders may raise objections if the company began a campaign of network domination.

Sooner or later they might want to crash the bitcoin price for something like bitcoin cash or some other rivalry crypto, but these ideas are mostly paranoid, and FUD fueled. Or maybe  they are not, and Bitmain is just raising it’s chances before cashing out all the chips. Or in this case - coins.

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