Research by Canadian firm Canaccord Genuity Group revealed that Bitcoin is getting more and more decentralized. The Canadian firm pointed out that Bitcoin was less decentralized during its early days. The company reached this conclusion after measuring Bitcoin’s hashrate distribution.
There has been an increase in competition in the mining space, leading to increased decentralization. According to Canaccord, mining pool GHash.IO has been controlling roughly 50 percent of total Bitcoin hashrate since mid-2014. GHash controlling such an enormous amount of hashrate makes Bitcoin vulnerable to a 51 percent attack.
So far this year, no single mining pool controls more than 20 percent of the Bitcoin network’s hashrate. Five mining pools each control between 10-20 percent, and the remaining groups control less than 10 percent of the total network hashrate.
Canaccord believes that Bitcoin’s increased decentralization is a positive development, adding that numerous factors contributed to it. The commoditization of Bitcoin mining chips is perhaps the most important catalyst behind Bitcoin’s increased decentralization. The progress made by ASICs has slowed down recently, allowing broader competition in the Bitcoin mining space.
Canaccord revealed that Canaan Creative is increasingly competing with Bitmain, due to Bitmain’s inability to produce a superior alternative to its Antminer S9 mining hardware. The close competition has enabled Canaan Creative to sell its chips to a wider market of miners and effectively compete with Bitmain.
The report stated that Bitcoin’s centralization, as measured by the Herfindahl-Hirschman Index, has decreased from 3,000 in 2013 to 1,200 currently. The HHI is used in measuring market concentration. An HHI below 1,500 shows that a marketplace is competitive, while HHI of 1,500–2,500 indicates a market is moderately concentrated. An HHI above 2,500 implies a highly concentrated market.
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