From the moment the bitcoin was introduced it was controversial. Never before has an electronically transmitted currency become available for personal use. And even before it was fully understood, it took off like lightening by investors seeking anything new that could be a potential source of income.
The bitcoin is the first decentralized currency and a bitcoin account can be set up easily with a free application called a ‘bitcoin miner.’ Bitcoins are stored in ‘digital wallets’ and can be transmitted to cover a transaction with an electronic signature.
The difference between bitcoins and other international currencies is that only a specific number of bitcoins were minted—21 million—and they were predicted to last until 2140.
Bitcoins can be accessed via the Internet and through automated bitcoin machines where transactions to buy or sell can be done right on the spot. There have, however, already been several cases of machines not functioning properly resulting in trades not being executed on time or not at all. In addition there has been at least one bitcoin company, Mt Gox, a Japanese entity, that has closed its doors citing bankruptcy, leaving traders with a loss of millions of dollars and investors questioning the legality and accountability of bitcoin handlers.
Ghash.io is a mining pool which until now has maintained a 50% stake in the bitcoin. And despite its guarantee made last January that it would not cross the 51% threshold, in a recent announcement, Ghash.io announced its intention to do just that -adding shares that would bring its total holdings to 51%.
As expected, the bitcoin community is up in arms over the move, sparking a fierce debate over mining centralization in general and Ghash.io’s independent move in particular.
Should Ghash.io go through with its intentions of maintaining 51% of the bitcoin network, it will essentially be in control of certain uncontested acts such as double spending individual bitcoins, preventing other miners and mining pools from profiting from sound currency blocks and be able to block transaction confirmations.
According to one expert hacker with years of experience in distributed systems, by moving over to 51%, Ghash.io will in fact
“acquire complete control over which transactions appear on the blockchain and which miners reap mining rewards.”
And with bitcoin holders concerned that once a 50% stake is reached by any one firm, the value of the bitcoin will decrease, bitcoin experts have been joining the outcry. Gaven Anderson, the Chief Scientist at the Bitcoin Foundation posted a blog in the foundation’s newsletter voicing concern and condemnation of the Ghash.io move while at the same time backtracking somewhat by stating that the
“bitcoin is still a work in progress and you should only risk time or money on it that you can afford to lose.”
Since making the announcement, Ghash.io has been keeping out of the news. In fact, the company has become unavailable for unknown reasons. The website is still accessible due to their CloudFlare protection, but miners are unable to access their statistics and the mining itself may have been affected. Users visiting Ghash.io receive a brief 502 error which then redirects them to an old, non-live version of the site. In addition, Ghash.io has not responded to any comments made through the site.
Citing fair competition as a response to the 51% argument, one mining pool member had this to say:
“In any market, competition and innovation drives growth and that is particularly true in an emerging and disruptive environment such as bitcoin. Successful and innovative companies cannot be expected to limit their growth or competitiveness as a direct result of their success.”
It is important to keep in mind that unlike traditional currencies such as euros, bitcoins are not managed by any central authority, government, company or bank. It is therefore, more open to corruption and fraud. At the CoinSummit Conference which will take place in London, U.K. on July 10th-11th, bitcoin industry leaders will be meeting to discuss the current situation of the electronic currency and can be expected to argue both sides of the cryptocoin.