In the second half of December, just two mining pools were responsible for mining more than half of Bitcoin’s blocks. We took a look at Foundry and Antpool to find out what's behind the mining giants, and whether Bitcoin is really as centralized as it seems.
While most of the market is focused on Bitcoin’s price fluctuations, a larger issue seems to be missing.
Ethereum’s centralization has been one of the hottest topics in the crypto industry since the network moved to proof-of-stake, with many critics warning of the dangers of the high-market-cap cryptocurrency relying on only a handful of centralized validators.
Since China’s coveted mining ban, the centralization of the Bitcoin network has all but disappeared from mainstream discussions, becoming the focus of a niche group in the mining space.
However, Bitcoin’s centralization is an issue that concerns the entire market, especially when only two mining pools produce the majority of its blocks.
The outlet took a look at Bitcoin’s global hash rate distribution and found that more than half of it comes from Foundry USA and Antpool.
Over the past ten days, these two mining pools have each mined more than a quarter of Bitcoin blocks. Foundry USA has mined 357 blocks since mid-December, while Antpool has mined 325. Foundry’s block production accounts for 26.98% of the network, while Antpool accounts for nearly 24.5% of the total block production.
图表显示了最大的比特币矿池之间的估计哈希率分布（来源：Blockchain.com）
Antpool has been at the forefront of Bitcoin mining for years, producing nearly 14% of all Bitcoin mining blocks over the past three years. Foundry, on the other hand, is a relatively new name in the mining world. However, it quickly rose to become one of the top ten mining pools by hashrate, accounting for 3.2% of the blocks mined over the past year.
A closer look at Antpool and Foundry USA reveals worrying levels of centralization — and a network of interconnected companies that effectively own half of the network.
Foundry – DCG’s mining giant
It took Foundry USA less than two years to become a force to be reckoned with in the Bitcoin mining world. The mining pool is owned and operated by the eponymous Foundry, a company founded in 2019 by the Digital Currency Group (DCG).
By late summer 2020, Foundry had become one of the largest Bitcoin miners in North America. In addition to mining, the company also provides equipment financing and procurement services. By the end of 2020, Foundry helped source half of all Bitcoin mining hardware shipped to North America.
Foundry’s huge success as an equipment buyer and miner is a direct result of DCG’s influence in the crypto industry.
The venture capital firm is one of the largest and most active investors in the space, backing more than 160 cryptocurrency companies in more than 30 countries. DCG’s portfolio is a registry of the industry’s biggest players – Blockchain.com, Blockstream, Chainalysis, Circle, Coinbase, CoinDesk, Genesis, Grayscale, Kraken, Ledger, Lightning Network, Ripple, Silvergate and many more.
Foundry, its wholly owned subsidiary, provides a one-stop shop for all these companies’ mining needs. The rapid growth of Foundry USA’s hashrate has led some to speculate that DCG’s companies are contractually obligated to conduct all mining through Foundry’s mining pools. However, it's worth noting that neither DCG nor any of the companies in its portfolio have confirmed this.
A mining ban imposed in China last year also helped.
Forced away from China's abundant and cheap hydropower, miners are looking for alternative locations that offer at least a fraction of their profits and a more welcoming regulatory environment.
The United States is a perfect location to relocate, offering miners a wide range of location and energy options. It certainly doesn’t hurt to have a mining pool as big as Foundry USA on their doorstep.
Antpool—Bitmain’s monopoly
Founded in 2014, Antpool is one of the oldest operating mining pools on the market. Antpool regularly accounts for more than a quarter of the global hash rate and almost never leaves the top ten mining pools.
The pool’s success lies in its perfect vertical integration – it is owned and operated by Bitmain, the world’s largest mining hardware manufacturer. The company behind the Antminer series provides its mining pool with the latest and most efficient Bitcoin hashers, helping it stay profitable even during the coldest crypto winters.
Bitmain’s influence on the global cryptocurrency market has led many to speculate that the company is obligated to allow its large buyers to use Antpool for mining. Since both Bitmain and Antpool are headquartered in China, many are also concerned about China’s influence on a large portion of Bitcoin’s hash rate.
The corporatization of cryptocurrency mining
It is important to note that mining pools are different from private mining operations. Unlike private miners, mining pools represent the combined hash rate of many machines owned by different entities.
The profit generated by the mining pool is divided among the miner owners or hashers based on the size of their contribution.
Just because Foundry USA accounts for a quarter of Bitcoin’s hash rate doesn’t mean DCG owns every machine that produces it.
However, Foundry provides the foundation and roof for its clients’ mining operations. The company's weakness could destabilize a large portion of the Bitcoin network and leave thousands of small miners and machines to fend for themselves while the Bitcoin network shuts down.
The same applies to Antpool.
When looking beyond Bitcoin, the centralization rate these two entities impose on the industry becomes even greater. Antpool also has pools for other cryptocurrencies – Litecoin (LTC), ZCash (ZEC), Bitcoin Cash (BCH), Ethereum Classic (ETC), and Dash (DASH), to name a few.
Foundry provides enterprise staking support for Ethereum (ETH), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), and Cosmos (ATOM), and the company does not disclose the number of assets it manages.
