Concerns that a pool of bitcoin investors has come together to control more than half the total processing resources used in mining of the virtual currency have led to a decline in its price.
Coindesk, which monitors prices of bitcoin, showed that bitcoin traded at around $600 on Monday, down from $653 on Wednesday.
The price flop follows reports that a bitcoin mining pool now has capacity to stage what’s known as “51% attack” on the virtual currency, an event that would compromise integrity of transactions or give room for double-spending on the same bitcoins, according to PCWorld.
GHash.IO is one of the groups that have committed computing power to bitcoin mining. Unlike its rival pools, GHash.IO controls over 50% of overall computing capacity utilized to generate bitcoins, giving its controllers leverage, if they so wished, to reject transactions already accepted by other miners.
The mere possibility of such an abuse of bitcoin mining power has send shivers down the spines of supporters of the once-thought to be completely decentralized currency. The concerns have even prompted bitcoin software engineer Peter Todd to sell out half the bitcoins he held.
“I’ve known for awhile now that the incentives Bitcoin is based on are flawed for many reasons and seeing a 50 percent pool even with only a few of those reasons mattering is worrying to say the least,” Todd stated.
GHash said it won’t abuse its near monopoly of bitcoin mining power. According to Vox, it would not be in the best long-term interests of GHash to make a move that would undermine bitcoin’s value, considering the group earns thousands of bitcoin on weekly basis.
However, bitcoin insiders still believe the convergence of bitcoin mining is likely to hurt the virtual currency’s credibility and efficacy in the long run. Bitcoin software developer Gavin Andresen asked GHash to abandon the pool and support one of its smaller competitors to level the play field.
To contact the reporter of this story: Deepak Tiwari at email@example.com