The Dangers of Mining Pools: Centralization and Security Issues

The larger percentage of cryptocurrency enthusiasts that turn to mining pools, all the more dangerous this kind of mining is likely to become.

Why mine together?In cryptocurrency mining - just like with real-life gold mining - the days of lone-wolf gold diggers drifting from place to place with their trusty tools in tow, following the trail of the elusive gold seams are long gone.

The infrequency of actually finding a block these days when mining individually is what makes mining pools so tempting for many people.

Of course, the utility of entering a mining pool is somewhat undermined by several factors.

Mining pools are definitely not a bad thing in and of itself.

Mining centralization also happens based on the location of the pool.

As the profitability of the mining operation is highly dependent on electricity costs, it is natural that miners are drawn to regions where such costs are lower.

Here is what's scary, though: As of last year, 74% of Bitcoin's hashing power has been distributed across five mining pools located in China.

With so many major pools located in China - a state notorious for its surveillance practices - miners should be concerned about the dangers of the exposure of their IPs.

With most of the large mining pools situated under Chinese influence thanks to the country's lower energy prices, there is a very real possibility of many things going wrong.