Amid the careening bitcoin price action of the last couple of weeks, a mining bottleneck is squeezing out the weakest bitcoin miners and consolidating the industry into fewer mining operations, Bloomberg reports.
A falling bitcoin price coupled with wear-and-tear on their machines will eventually force miners to mine at or below the cost of electricity. According to Bloomberg, miners’ current breakeven point is $4,500, with the exception being miners who manage to cut significantly reduce their costs.
The news outlet asserts that “Only a select few can afford to stay in the game: miners with scale, very specific business models and extremely low electricity costs,” based on their reportage and interviews with miners and industry experts. They quoted one Washington (US) state-based miner, Malachi Salcido, as saying “We are entering in the phase when there’s a flushing out of the market.”
Data shows that miners are indeed leaving the network, indicated by falling hashrate and, subsequently, falling difficulty, as a result of unprofitable mining. CryptoGlobe has reported at length on the phenomena over the past months.
It also appears correct that mining is consolidating to fewer and fewer firms or pools of mining power. Charts clearly show a decreasing variety of pools present in Bitcoin mining operations. BTC.com’s all-time mining hashrate charts show that unknown miners controled nearly 40% of the flagship cryptocurrency’s hashrate, a trend that has been disappearing. Last year, the charts reveal unknown miners have been crushed as they’re at 3.8%, while BTC.com, AntPool, SluhPool, ViaBTC, and BTC.top have over 10% of the hashrate.
(bitcoin mining pools, last year; source: btc.com)
51% Attack To Come?
The upshot of Bloomberg’s article is that, with Bitcoin mining in overall fewer hands, a 51% attack on the network becomes easier. Falling prices do, for the reasons discussed above, make these attacks easier, and there has been a rash of attacks on altcoins this year as a result of falling prices. Just today, the 2014-vintage Vertcoin altcoin was reported by TheBlockCrypto to be under attack.
While more mining consolidation may make it technically easier to launch an attack, this would also mean that remaining miners have an even larger interest in high bitcoin prices – which would almost certainly plummet if the network suffered a successful attack. Several other counterarguments on the matter can be found scattered across the web.
Long story short, most analysts believe attacking the Bitcoin network, even as the hashrate falls, isn’t economy viable. The hashrate is notably still up over 150% when compared to last year.