The halving of the bitcoin block reward this past July has changed the profitability of new miner entries, a development that could ultimately impact bitcoin’s decentralization, according to Sveinn Valfells of Flux, Ltd. and Jon Helgi Egilsson of the Faculty of Economics at the University of Iceland.
In a paper, “Minting Money with Megawatts” for the Institute of Electrical and Electronics Engineers (IEEE), the authors noted that declining profitability for new miners could further consolidate mining activity. This, in turn, could increase the likelihood of miners colluding to attack the blockchain’s bitcoin transaction history, which could threaten the cryptocurrency’s decentralized character.
Bitcoin’s architecture created a payment network independent of central banks and existing financial service providers.
The paper goes into depth on the mechanics of bitcoin mining. Mining, a computational process, provides a key part of the bitcoin network. The bitcoin transaction ledger is distributed without central copies maintained by trusted parties. A chain of time-stamped transaction blocks comprises the bitcoin blockchain. Cryptographic hashes of the blocks secure the blockchain’s integrity. Each block references the previous block’s