Bitmain's Mining Monopoly Compromises Bitcoin's Decentralized Nature
Jihan Wu and Bitmain hold so much mining power that they could indeed be manipulating the market.
Bitmain must be regarded as the most influential company in the Bitcoin ecosystem based on their processing power, but does than mean they have the power to manipulate the market?
Allegations have been levied that the recent hard fork into Bitcoin Cash was a move by Bitmain’s leader Jihan Wu to undermine Bitcoin, although he has denied this. Mining centralization seems to be a real thing, and this could be hurting Bitcoin’s claim of being governed by no one.
There was a time when mining Bitcoin was anyone’s game, and people using their home computers would truly spread the wealth, and thus the power across a large user base.
However, as the difficulty has risen, professional mining groups with specialized computer chips emerged and formed these groups - or pools - mostly in China, to dominate the creation of the digital coin.
Bitmain became the leading force in Bitcoin mining with the development of the ASIC chip, which saw its processing power soar to around 29 percent of all the hashing power globally with its control of Antpool and BTC.com.
Vulnerable to manipulation
The recent hard fork of Bitcoin into Bitcoin Cash, which was supported by a miner in Shenzhen named ViaBTC - which happened to be a company that Bitmain has invested in - had many alleging that Wu was party to this in order to manipulate the markets.
Wu denies the allegations, but the links made seem to suggest that it is not only traders with hordes of Bitcoin who can affect the market, but perhaps miners as well.
Undermining Bitcoin’s integrity
One person who is of the opinion that Wu, and Bitmain, is engaged in “shenanigans” is CSO of the cryptocurrency consulting firm Blockstream, Samson Mow.
“Jihan does have a lot of control for now, and much of that is simply due to mining centralization. As Bitmain is so vertically integrated, from selling ASICs, to operating mining farms, to running mining pools, he can prevent network upgrade and attempt to hijack the Bitcoin brand with things like Bitcoin Cash," Mow said.
The Aug. 1 fork, and the debate of scaling Bitcoin, was always considered a philosophical feud. However, in the real world market of digital currencies, they provide perfect opportunities for mining cabals to sway the future of Bitcoin.
Mow still believes in the democratic and decentralized nature of Bitcoin. The influence that can be enacted by miners such as Wu will only be fleeting, as it is the power of the users that has the most say.
The recent implementation of SegWit shows that Bitcoin is still fundamentally democratic.