NEW YORK, N.Y. – The largest group of bitcoin miners, which maintains and processes transactions in the digital currency, is promising to avoid majority control of the currency as a temporary measure to maintain the payment system’s credibility.
Mining pool GHash.IO, which is controlled by a British company, CEX.IO Ltd., said Tuesday that it would not amass more than 40 per cent of the processing power of the bitcoin system. Earlier this summer, it briefly exceeded 50 per cent.
Miners operate the computers that keep track of bitcoin transactions. As a reward, they receive newly minted coins. A miner that controls more than 50 per cent of bitcoin processing could control the flow of transactions, freeze people out of the network and keep all future bitcoins for itself. However, that would undermine the usefulness and credibility of the system, potentially making bitcoins worthless.
Changes to the software have been proposed to avoid the problem of a “51 per cent attack,” but CEX.IO said it isn’t “able to solve the problem in a long-term perspective, taking into account interests of existing mining pools, individual miners and bitcoin community.”
The company is setting up a committee of major bitcoin market players to develop a technical solution for the problem.
Bitcoins allow people to send money over the Internet without going through banks. Transaction costs are low, but it also means the currency is useful for illegal activities such as money laundering and drug sales. Bitcoins have also become a target of speculators betting on the currency’s continued run-up. Its value has grown a hundredfold in the last two years.
From a technical standpoint, bitcoins are sequences of numbers, painstakingly produced by computers churning through millions of calculations. Bitcoin transactions are recorded in a virtual public ledger, known as the blockchain. Miners are in charge of maintaining the blockchain.
One mining computer might take years to produce a single block of coins, and there’s no way to know when that might happen. In pools, miners divide the bitcoins they create among themselves in proportion to the work done, providing with them with a steadier stream of income.