Mining Oligopoly: Six Pools Control 75% of Bitcoin's Hashrate, Data Shows

Data analyzed by leading fintech media company ChainDD has recently found that six mining pools currently control nearly 75% of the Bitcoin network’s hashrate, and five of them are located in China. Notably, three are associated with crypto mining hardware manufacturer Bitmain.

According to ChainDD’s 2018-2019 Cryptocurrency Market Annual Report, created by its DD Think Tank, 80% of Chinese bitcoin miners are located in Sichuan, and although most cryptocurrency miners are currently located in the country, some are moving overseas “due to restrictions.”

China offers crypto miners cheap energy sources, thanks to various natural resources it takes advantage of. Its government, however, has cracked down on cryptocurrencies in the past, although recently a court ruled Bitcoin should be protected as property by law.

The report further found that large mining companies are more prone to hold onto their mining machines during bearish market turns, as the amount they’ve invested in their operation justifies it. This, it claims, gives them a competitive advantage later on, as they mine at a loss coins that gains value in the long run. It adds:

Additionally, large mining companies are more resilient against risks of BTC price drop, thanks to their advantages in electricity and low price mining equipment.

ChainDD’s DD Think Tank noted that as of January 21, six mining pools – BTC.com, Antpool, SlushPool, ViaBTC, and F2Pool, had 74.48% of the BTC network’s hashrate. These pools, with the exception of SlushPool, are based in China.

Out of these three are related to Bitmain “directly or indirectly.” These are BTC.com, which had over 21% of the network’s hashrate, Antpool (13.9%), and ViaBTC (10.51%), which received investments from the firm.

Bitmain, as CryptoGlobe covered, was eyeing an $18 billion initial public offering (IPO) last year, potentially the largest in history. Since then, it has been revealed the Hong Kong Stock Exchange (HKEX) is “hesitant” to approve its IPO.

Daily BTC Production Dropped

The report further found that the rate of new Bitcoin’s coming into the market decreased last year. It was at an annual high in January of 2018, as 2,038.31 coins entered the market a day, while in November the number dropped to 483.

Notably, Bitcoin’s mining difficulty increased 173.2% throughout the year. November’s dip in the amount of coins coming into the market is associated with Bitcoin Cash’s (BCH) hard fork that created Bitcoin Satoshi’s Vision (BSV).

Amount of BTC produce per month last year

This, as at the time BTC’s hashrate dropped significantly, presumably as both sides of the fork battled to try and control hashrate. While BSV threatened to mine empty blocks on BCH, the BCH side attempted to stop that from happening, leading to what became known as a hash war.

It’s known that Bitcoin.com’s mining pool, at least, diverted its BTC hashrate to BCH to contribute. Reports suggested before the fork Bitmain deployed 90,000 Antminer S9 ASICs to prepare.

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Chinese Court Rules Bitcoin Is Legally Protected Virtual Property

The Hangzhou Internet Court, in China, has recently ruled bitcoin is seen as virtual property in the country, and as such is legally protected.

The ruling came in a case in which the plaintiff, Mr. Wu, sued the Shanghai Technology Company, which allegedly operated the FXBTC cryptocurrency exchange on Taobao, a leading Chinese online marketplace, and sold bitcoin back in 2013.

Wu reportedly bought 2.675 BTC for 20,000 yuan, about $2,900, back in 2013 from the exchange. In 2017, during the cryptocurrency market’s bull run that saw bitcoin hit a near $20,000 all-time high, the buyer wanted to access the funds, but found out FXBTC closed and could no longer get to the BTC.

According to Beijing News, the plaintiff claims the Shanghai Technology Company didn’t warn it was closing the platform nor gave him a chance to access the funds afterwards. The store likely shut down as between 2013 and 2017, the Chinese government made it illegal to trade cryptocurrencies, which in turn forced Taobao to stop vendors from selling cryptos on its platform.

While the plaintiff failed to prove Shanghai Tech was the vendor that sold him the bitcoin and lost the case, the court did determine bitcoin is legally protected virtual property.

According to Dovey Wan, this was seen as a bullish signal in China and chatter on Weibo, a Chinese microblogging platform similar to Twitter, seemed to point to this as the reason behind bitcoin’s recent price surge.

According to CryptoCompare data, BTC rose 4.8% in the last 24-hour period, and is currently trading at $10,300. Earlier today, bitcoin jumped from a $9,400 low to as much as $10,500 before facing a small correction.

Notably, this isn’t the first time a Chinese court defends bitcoin. As CryptoGlobe covered late last year, an arbitration court ruled bitcoin should be protected as property by law, and clarified at the time Chinese law doesn’t forbid owning or transferring bitcoin. Earlier this year, a prominent Chinese lawyer argued owning and occasionally trading bitcoin is legal in the country.

On Twitter, Wan clarified that while holding bitcoin as private property is legal, trading the cryptocurrency “in a systematic way” isn’t.