The blockchain technology has gained significant popularity among different users around the world by promising them a fully decentralized network independent from trusted third parties, governments or other central authorities. Instead of trusting a single instance, the trust is distributed among a large group of people, that validate transactions and add those to the blockchain. This process, referred to as "mining", has experienced trends of centralization, possibly presenting a major threat to the security and usability of blockchains. So far there is only a limited understanding of the mechanisms behind centralization of mining power. To better understand the underlying mechanisms, we investigated the major Proof-of-Work blockchains (Bitcoin, Ethereum and Litecoin) as well as their successful forks (Bitcoin Cash, Bitcoin SV, Ethereum Classic). We found that the mining ecosystem seems to be self regulating and adapts timely to foreseeable changes. Only unforeseeable adjustments, such as a split of the blockchain, result in strong temporary fluctuations and centralization. Our results provide a thorough understanding of the mining ecosystem and gives reliable indicators for governance control in major public blockchains.
Hofmann, Adrian; Schatz, Fabian Josef; and Winkelmann, Axel, "Uncovering the Mining Behaviour in Proof-of-Work Blockchains" (2020). In Proceedings of the 28th European Conference on Information Systems (ECIS), An Online AIS Conference, June 15-17, 2020.
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