One Zcash Mining Pool Controls Over 51% of the Network Hashrate

Cryptocurrency’s mining aspect can be both a blessing and a curse. More specifically, we all know Bitcoin has a centralization problem when it comes to mining. Unfortunately, it seems Zcash has a similar problem right now, with one pool controlling over 50% of the network hashrate. It is unclear why miners aren’t switching over, as there are plenty of other pools to choose from. Then again, everyone wants a good chance of making money, which means joining a big pool.

Zcash Mining is Incredibly Centralized

It is always interesting to see how the mining ecosystem evolves for different cryptocurrencies. A fair few coins suffer from centralization issues in this regard, which is only to be expected. In the Bitcoin world, the centralization problem comes in the form of a few Chinese pools holding the majority of the network hash power. Sooner or later, that will backfire, but very few people are willing to make any changes in this regard. Profitability hinges on joining a pool which has a good chance of finding blocks, after all.

Interestingly enough, Bitcoin is not the cryptocurrency with the biggest centralization problem right now. That appears to be Zcash, with one mining pool controlling over 50% of all hash power right now. This is pretty interesting, considering there are a dozen decent pools to choose from. Moreover, we have seen some new pools pop up over the past week in an effort to encourage people to move away from feeding Flypool with even more hash power.

Right now, Flypool is over twice as large as F2Pool as far as the ZEC hashrate is concerned. In this regard, Flypool could easily perform a 51% attack against the network if it were ever inclined to do so. That’s not happened yet, but there is no reason to think it never will. There is no current incentive for Flypool to do so, as it already controls the Zcash network. It is not a major concern as long as nothing goes awry, but it’s unknown how long that will be the case.

Several Zcash miners have already moved away from Flypool in an effort to diversify the hashrate. So far, their efforts have not made much of an impact, but that situation may change sooner or later. It is very difficult to take away the majority of hash power from one pool and ensure other pools distribute this workload. For most miners, the only thing that matters is maximizing income in one way or another. Right now, that means joining the pool with the most hashrate, as it has the best chance of finding blocks on a regular basis. The knife cuts both ways in situations like these.

It will be interesting to see how things play out in this regard. Zcash has lost some of its momentum since launching, but that is not entirely surprising. That’s not because there is no real value to Zcash, mind you, but mainly that it’s flown under the radar for some unknown reason. This may also explain why the mining centralization issue has gone by unnoticed for so long. It is an interesting development worth keeping an eye on; that much is evident.

It is also worth noting that Zcash is not the first major altcoin to suffer from centralized mining issues. More specifically, Litecoin had a similar problem not long ago, but it seems everything turned out all right in the end. There is no reason to think Zcash will not overcome these issues, although it remains to be seen how they will be addressed. For now, miners need to keep an eye on this and ensure they move their hash power to a different pool until things normalize.

  • xeridea

    Author is incorrect on big pools. You do not need to join a large pool to profit. If your pool had a mere 1% of network hashrate, it would find about 6 blocks a day, which is totally reasonable. Big pools find more blocks, but there are far more miners to split with, so in the end, the size of the pool is completely irrelevant to profit. This site seems to have a ton of misinformation on most posts.

    • Flaim

      I think your maths is wrong.
      At each block, you only have a 1% chance to find that block. So you have to be very lucky to beat someone with a 50% chance.

      • xeridea

        Yes, but if 1 block is worth 12.5 ZEC, and 500,000 people are mining it, each one gets $0.005. If 10,000 people are mining, they find far less blocks, but each block pays 50x as much to each miner, about $0.25. In the end, pool size is completely irrelevant to average profit. The only benefit of a pool is more consistent payouts vs solo mining. If someone is big enough to solo mine, they don’t pool mine due to pool fee.

        • Flaim

          You seem to be saying that a payout is guaranteed as long as you solo mine long enough because all your mining for the year counts towards a payout in the end. I dont see it like that. It seems to me that you just need to get lucky because it’s a game of chance that resets every 10 minutes. The only way to increase your luck is to increase your hash rate. So getting a tiny payout consistently in a pool wins over never getting a payout as solo. Otherwise heaps of people would solo mine or mine in groups of 2 or 3.
          I would solo mine BitCoin if I knew I would get a payout once every 3 years.

          • xeridea

            I never said a payout is guaranteed. I said if you have 1% of network hashrate, on average you will get 6 blocks per day, which is enough that it would be fairly consistent. It is still 100% luck based, but the chance of having 1% hashpower and not finding block for say a week is extremely unlikely. I said if someone was big enough to solo mine, then it is better, there are large farms that would have this kind of power, but most would be better at pool unless you had say at least 500 1080 TI, or didn’t mind playing the block lottery. I said a large pool is not needed, I didn’t say no pool at all, just that a large pool has no more profit than a small pool, and if pool has at least 1% hashrate, consistency should be fine.

          • Flaim

            So under 1% hash power would not be worth it?

          • xeridea

            Under 1% would mean more variability. I used to mine at a smaller Bitcoin pool back in the day, I think they would avg like 3 blocks per day. It was still fairly consistent, but a bit variable. BTC blocks are really long though, 10 minutes vs ~1-3 minutes for most coins now, 15 seconds for ETH. Depends on your variability tolerance, but a large pool such as 20%+ is definitely not needed.

          • Justin

            Interesting, I totally thought the way Flaim did about the block payouts, but hearing your explanation xeridea also makes sense that in the end the math can always be counted on. Ended up being an open minded discussion, but yea I’m going to have to stand up for the writer on this one – to say their site continuously presents false information sounds frankly ignorant.

            There is an amazing amount of fake information to sift through to find the truth and it’s an ever evolving task in which one has to be completely cool with adapting their theories. How do you know the information is incorrect? I guarantee something you think is correct I can prove wrong.

            You taught me something with your above replies – gave me a clearer concept of how crypto-mining works. Keep it open minded and the community will grow in kind

          • xeridea

            “Sooner or later, that will backfire, but very few people are willing to make any changes in this regard. Profitability hinges on joining a pool which has a good chance of finding blocks, after all.”

            Makes it sounds like if you don’t join the largest pool, you are taking crazy insane risk of not profiting. As I explained, if your pool had 1% of hashrate, variability would be minimal with pool finding average 6 blocks per day. So unless you are a miner banking on finding a block every 10 minutes so you can buy a cheeseburger, it is irrelevant. Bitcoin has longer blocktimes, and far more pools, most with small % of hashrate, you don’t see people flocking to the biggest pool, it just isn’t necessary.

            Misinformation, I am not talking about anything you need to hunt down to verify, or overly technical, just general stuff any crypto enthusiast, investor, miner or otherwise with half a brain should know. It just seems like nearly every article has something incorrect, which is unacceptable.

    • Brian Stafford

      Thank you for saying something. This article’s inaccuracy could exacerbate the problem. Author should issue a correction.

  • Flaim

    This mining centralization needs to be addressed everywhere. Even VertCoin which prides itself on being anti miner centralization has a pool with over 51% hash rate called Coinotron

  • Spencer Rhodes

    Would a 51% hashrate advantage allow a nefarious actor to deanonymize transactions on the Zcash network I wonder? Zcash is a dubious option for transaction privacy anyway I suppose given the funding sources behind the project.