Bitcoin mining had quite a year in 2014. The industry faced a serious centralization scare when Ghash.io threatened a 51% attack on the network at the start of 2014. Near the year's end, mining diffic
Bitcoin mining had quite a year in 2014. The industry faced a serious centralization scare when Ghash.io threatened a 51% attack on the network at the start of 2014. Near the year's end, mining difficulty dropped for the first time in two years. The bitcoin price fell throughout 2014, yet the network's overall hash rate surged by around 2000%.
What comes next? We spoke with three major figures in mining hardware and mining pools about 2015: Bitmain, Ghash.io, and BTC China.
The decentralization question looms largest for bitcoin users who follow mining. At different times, several pools have controlled large portions of the network's hashing power. By late 2014, power distribution had evened out. Ghash.io, which stirred panic at the start of 2014 with its network share, had shrunk to 10% of the total hashrate.
Jeffrey Smith, CIO of Ghash.io, expects mining to stay decentralized through 2015. He said: "Yes, Bitcoin mining will remain decentralized in 2015. We are watching an extremely [intense] competition between Chinese, North American and European vendors of the mining hardware. Actually, existing pools are reflecting the power of certain vendors."
Bitmain sees a different pattern. The company predicts the distribution of hashing power among large mining farms will match 2014's configuration. But they noted that new mining pools are appearing. "The mining pool service will be more decentralised. Lots of bitcoin enterprises are developing pool software and opening mining pool services. There will be more and more pools in 2015 and the top pool's market share will shrink," their spokesman said.
BTC China's lead engineer Dong Fu made a different case. The Chinese exchange launched its mining pool in late 2014 and has already captured just under 10% of the network's total hashrate. BTC China targets 10-15% market share in 2015.
Yet BTC China's outlook for the longer term differs. The exchange foresees consolidation: "Bitcoin mining will become more centralized over time," they stated.
Cloud mining gained traction in 2014 and all three operators predicted the trend would continue through 2015. Ghash.io suspended their cloud mining service this week. Smith explained the dynamics: "We will likely watch ordinary users buy cloud mining power, while industrialists with access to the electric energy will buy hardware. Such behaviour is expected due to the fact that theoretical mining rewards will tend to the average cost of the energy, accompanied by hardware maintenance risks."
Mining difficulty might drop again if conditions shift. All three agreed on the mechanism. Dong Fu described it bluntly: "If the price of bitcoin continues to drop, the cost of electricity bills will surpass the amount of bitcoin mined, which may [cause] more miners to stop mining. This will cause a decrease in hashrate and drop in difficulty."
In other words, bitcoin's price governs what happens with difficulty. The connection between bitcoin's market value and the network's hashing power will become one of the most watched relationships in crypto through 2015.
These insiders earn their living from mining trends, but bitcoin has taught everyone one reliable lesson: prediction is impossible. No one knows what happens next.
