Over the last few days, GHash.io, the largest Bitcoin mining pool, has grown to control 51% of the hashing power of the Bitcoin network for hours at a time. This is problematic, because with this level of control, GHash.io is in a position to exert considerable influence over the network, allowing them to double-spend Bitcoins, disrupt network transactions, and generally operate as a privileged central authority in the Bitcoin network.
GHash.io has issued a press-release today responding to the situation and calling for a round-table meeting of the major players in the Bitcoin community (and the Bitcoin foundation itself) in an attempt to find a long-term solution to the 51% problem.
The press release acknowledges the potential threat that they now pose to the Bitcoin network, but holds that GHash’s monopoly is natural, and that simply demonizing GHash and encouraging people to use its competitors is not a sustainable solution to the long-term problem of mining pool monopolization.
In the press release, GHash says, “[…] It is our intention to help protect and grow the broad acceptance of Bitcoin and categorically in no way harm or damage it. We never have and never will participate in any 51% attack or double spend against Bitcoin.”
This comes as faint reassurance to the community as a whole. When talking about a network based on trustless, provably reliable technology, being asked to trust the faceless, anonymous management of mining pool is justifiably setting off alarm bells across the Bitcoin community, and attracting considerable ire, particularly in the face of GHash.io’s fairly unrepentant stance in the press release, in which they describe themselves as “victims of their own success.”
That said, while their response is certainly self-serving, GHash.io isn’t wrong. The situation here isn’t going away. The purpose of mining pools is to socialize risk, and larger pools socialize risk more effectively. If the system of incentives is allowed to stand, there will always be the threat of single large mining pool ballooning to a majority share of the network. It’s a tragedy of the commons problem, and an issue systemic to the way Bitcoin is currently set up. Even if GHash.io were to voluntarily disband, it would only be a question of time before another mining pool came into the same position — and possibly not one as ethically managed.
We might like to see GHash.io punished for exposing the issue, but even if the current situation is resolved and GHash.io returns to a minority stake, the problem will reoccur in months or years, when Bitcoin is more widely used and more is at stake. The situation must be resolved now, permanently. All of the options going forward are going to be difficult, but the Bitcoin community is better off biting the bullet now and risking an eight billion dollar market cap than postponing the problem for five or ten years and risking far more.