Potential Consequences Of Bitcoin Mining Centralization

While centralization appears to be a natural process inspired by competition, it has derailed Bitcoin by deviating it from its original course

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Centralization is a distress to cryptocurrencies and is associated with unfairness and a lot of foul play. It comes naturally as a result of the growing competition within the crypto ecosystem. Now that the mining of cryptocurrency is an expansive industry, individuals and organizations having huge amounts of infrastructure and hashing power are usurping it.

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Cryptocurrencies ban in China, what consequences it will apply to offset of the geographical center of the network validators.

While centralization appears to be a natural process inspired by competition, it has derailed Bitcoin by deviating it from its original course. Before the ban, a huge majority of the giant crypto mining pools were located in China and under their influence. This was because the country’s energy prices were lower compared to that in other countries.

As much as mining pools have geographical bases, Bitcoin miners and their mining hardware are not. Their hash rate may also follow them wherever they go, marinating the possibility of these miners changing their stand based on certain factors. For this reason, pundits prefer looking at mining pool hash rates as being more than a single controllable and manipulatable monolithic bloc. They look at it as a marketplace and an accumulator with the ability to inspire loyalty. 

Should the rewards or technical situation change at any given time, then it is possible that focus as well as activity will shift towards the mining pools within Europe, North America, and other parts of the world.

What potential outliers can be detected by monitoring the hash rate in one geographic impact area?

For a long time, China had always been the pillar of the crypto industry, owning between 60 and 80 per cent of the world’s BTC mining. The ban however saw over 50 per cent of BTC hash rate dropping from the network.

The first outlier we saw following the Chinese ban on cryptocurrencies was other countries overtaking China in terms of mining. This is because the ban took down the virtual presence of more than half the miners in the world.

Another outlier was increased electricity costs in places such as Germany, who recorded ten times more consumption than China ever recorded.

Beginning June last year, the crypto market witnessed a 101.44 per cent hike in BTC hash rate. The fuel shift was inspired by the Chinese government cracking down on crypto mining, resulting to a deviation from the normal BTC mining balance.

Among the first indicators for this shift was 38 per cent dip in worldwide network hashrate, corresponding to China’s hash rate share prior to the crackdown. This is an indication that all the Chinese miners shelved or downed their tools almost simultaneously.

How GMT aims to deal with it:

Last year we briefly mentioned GMT Token. This project may potentially bring a revolution to the crypto ecosystem by eliminating the need for Bitcoin enthusiasts and miners to have to buy equipment, set up, maintain and upgrade it. The project has given this responsibility to their reliable service centers, leaving GMT token holders with nothing to do but earn BTC passively. 

Due to the fact that GMT is not prone to significant fluctuations as a result of transitory market situations, BTC incentives will be paid independently of the market scenario. Web 3.0 is expected to address the key challenges now faced by centralized Internet, and GMT is dedicated to contributing and solving challenging issues with the new technology.

When it joined the Bitcoin Mining Council (BMC) last November, it joined well-known bitcoin mining companies such as Core Scientific and Hive as well as 28 other members to demonstrate its support for openness in the industry while also sharing best practices and informing the general public about the advantages of Bitcoin and mining.

GMT wants to grab 20 per cent of the world's Bitcoin mining, which is made possible by other players in the mining market enrolling in the mining. It is expected that GMT will allow miners to place their equipment in the data center in return offering GMT tokens in an amount proportional to the token supply capacity. 

Burning tokens has almost become a tradition for the GMT team. So it will not be an exception in the future. Part of new tokens will be burned after the distribution (it is important to note that the team burns only its own token, not the holders'). The released capacity will be distributed to all GMTs in circulation. As a result, the supply capacity of each GMT as well as the mining capability will grow. Allowing other participants to take part in the project, GMT token will become a unique ecosystem uniting the GMT mining members. According to our calculations (the GMT team is yet to respond for comment) the value of GMT token is expected to increase to $1.5 in the next 12 months.

The decentralized computing power will continue to expand as new equipment is housed in GMT data centers situated throughout the globe (not in one country). Because GMT is not yet operational in the United States, big miners from other countries joining the project might take some of the global hash rate away from American miners.

The "bridge" feature of the GMT token allows users to transfer their tokens between the ERC-20 and BEP-20 standards with ease. GMT is listed on Bittrex, one of the most popular exchanges, and GMT hopes to be listed on many more shortly. Backed by sports celebrity: Undefeated UFC champion Khabib Nurmagomedov is the ambassador for GMT token, providing global recognition and transparency.

Token holders don't have to worry about purchasing, configuring, or maintaining equipment or finding a location for it. Within 24 hours of purchasing a token, users may begin mining. The token, unlike hardware, is extremely liquid. It merely takes a few minutes when selling a token, and there are no extra costs involved.

Users don't need to keep track of the upkeep of their equipment. The GMT team keeps an eye on the stability of devices' hashrates. The GMT team will deploy backup equipment if numerous devices fail.

One of the main differences between GMTs and other tokens is that each one is backed by actual computer power (measured in TH/s). GMT is dedicated to environmental stewardship and long-term growth. Hydroelectric power plants and wind turbines now provide part of the electricity for GMT data centers. Sustainable energy consumption will be the primary focus going forward to cause the least amount of environmental impact possible.

So it seems like a lot of new projects appear on the market every day and some of them are even aimed at global changes, like the distribution of the total hashrate or reducing the harm of mining to the environment. At the moment, it is not known what such initiatives will lead to in a global perspective, but the very fact of the existence of such projects inspires a certain amount of optimism in the crypto community.

Note: Investment in cryptocurrency is subject to risk and readers should do their own due diligence. Entrepreneur Media does not endorse any such investment.