Changpeng Zhao, the effervescent CEO and founder of Binance, the world’s largest crypto exchange by volume, has not been sitting on his hands. His firm stated that it is entering the crypto mining space with Binance Pool, a new service that will cater to the needs of miners and give them access to a broad range of additional financial options. As with any innovation that will pool mining efforts, the issue of centralization of hash rate power has been the consequence. If mining interests can attain more than 51% control of a crypto blockchain network, then serious security and control issues come into play.
Binance’s statement seemed tame enough: “Binance is excited to announce the launch of Binance Pool, offering Proof of Work (PoW) and Proof of Stake (PoS) services for a variety of coins and tokens. Binance Pool’s first product offering will be Bitcoin mining, using a FPPS (Full Pay-Per-Share) payment method.” The firm also announced that, over the previous weekend, it had already mined its first Bitcoin block. The service will be expanded beyond BTC mining support to other tokens down the road.
Lisa He, the head of Binance Pool, explained to Cointelegraph staff that: “We aim to establish a comprehensive platform for miners that will bring more possibilities to the mining industry by bridging traditional mining to financial services.” CEO Zhao added: “As an integral part of the global crypto market, empowering miners will therein enable significant growth and scale in the larger industry.” Zhao also benefits by being able to sell excess computing power to the mining community.
Centralization concerns raised in the Bitcoin community
One of the strengths of the Bitcoin network is that its mining interests are so widely distributed. For that reason, Bitcoinists often tout that they are the most secure network in Crypto-Land. This claim, however, is not an absolute by any means. Bitmain and its subsidiaries have at times crossed the 51% threshold, but portions of their hash rate power are not necessarily Bitmain’s to use. Bitmain’s control has subsided over time, but there is still a concern that over 50% of Bitcoin’s hash rate is based in China.
Will Binance now become a big player in the mining sector and begin to throw its collective weight around? Twitter users inundated the social media platform with concerns that today’s relatively balanced distribution of hash rate power could dramatically change. One Twitter user opined: “This either ends super good for Bitcoin with multiple competing mining pools offering mass decentralisation or…. well I guess you can figure out the flipside of the coin.”
Lisa He argues that Binance’s entry into the space should dispel these fears: “In 2018, the mining pool of a mining machine manufacturer owned nearly 51% hashing power of the whole Bitcoin network, and the security of the Bitcoin network was doubted. With industry players like Binance continuing to enter the mining space and contribute computing power to the industry, the mining industry is actually getting more decentralized than it was two years ago. The largest pools have less than 20% of the computing power of the whole network, and the assets on the Bitcoin network become more secure.”
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