Bitcoin quietly faced and passed through what has been called a “doomsday” scenario Friday night. GHash, a bitcoin mining pool (operated by an anonymous entity called CEX.io) briefly held 51 percent of total network mining. While that may sound like a less intriguing headline than “Mt. Gox Looses Hundreds of Millions of Bitcoins,” it may in fact denote a situation that is much, much more serious to the future of the digital currency’s future.
The risk inherent in this is a 51 percent attack. Such an attack capitalizes on the power holding a majority of the computational power used to mine the cryptocurrency bestows. In short, the decentralized currency essentially become centralized under the dominant mining network – in this case GHash – which then gives them the power to do such unproductive things like double spend bitcoins and control the blockchains.
“The Bitcoin narrative, based on decentralization and distributed trust, has collapsed. This is far more important than the Bitcoin economy, which is about as healthy as it was yesterday, and the Bitcoin price, which will likely remain afloat for quite a while. But the Bitcoin economy and price are trailing indicators. The core pillar of the Bitcoin value equation has collapsed,” wrote computer scientists Ittay Eyal and Emin Gün Sirer on the blog Hacking, Distributed.
GHash’s dominance over the bitcoin market was short-lived—about 12 hours long.
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