Bitcoin , Cryptocurrencies , People Binance jumps into bitcoin mining The biggest cryptocurrency exchange promises ‘the lowest rates’ but also raises concerns about the concentration of mining power in a few hands By Leo Jakobson / April 27, 2020 /
Cryptocurrency exchange Binance jumped into bitcoin mining business today, announcing the launch of Binance Pool.The move comes only weeks before the third “halving” will reduce the reward for mining a Bitcoin block from 12.5 BTC to 6.25 BTC—an event that has preceded big price increases in the past.
While initially only supporting Bitcoin, Binance Pool will expand into other cryptocurrencies, supporting both proof-of-work and proof-of-stake protocols.It joins a number of other major exchanges, including Huobi and OKEx , which created pools last year.
“With Binance Pool, we aim to establish a comprehensive platform for miners that will bring more possibilities to the mining industry by bridging traditional mining and financial services,” Binance said in an April 27 blog post .Convenience is key
“By leveraging the benefits of an exchange platform,” the statement said, Binance Pool can offer “more comprehensive services to increase opportunities and enable miners to earn more.
Binance Pool connects miners to Binance’s suite of financial products, including Binance Futures, Spot & Margin trading, Binance Lending, and Binance Staking.”
It also pointed to Binance’s tech support capability, noting, “Binance Pool is led by the team of seasoned professionals, with top-notch operating expertise and know-how of the latest mining technologies and equipment.”
The mining platform will send miners’ earnings directly into their Binance accounts, offering what the exchange said are the “lowest fees in the market.” These will be under 2.5%, although fees will be waived until June 1.
There is also a form to fill out requesting an extension of this zero-fee period.Participation in this VIP program appears to be based on the size of individual miner’s operation: the form requests hash rate, mining equipment, and an open question about the “advantages” of their operation.How much power?
With centralization a growing concern in the cryptocurrency space, some questioned whether Binance’s entry into the mining business would be a good or bad thing.
On the one hand, it is another competitor, and one with the user base and name to be able to quickly scale up to challenge the biggest pools.
On the other, there is growing concern that giant pools have too much sway over bitcoin—and that can be an even bigger problem for smaller coins.
Indeed, as Binance CEO Changpeng “CZ” Zhao tweeted on his @cz_binance account, Binance Pool launched as the 11th largest BTC mining pool.Although, to be fair, he was citing that as a reason not to be concerned about its power in the field.It’s day one, and we’re not even in the 10! (Photo: Twitter)
That comment can in response to an April 25 tweet from Spencer Noon, head of crypto investments at DTC Capital, who said, “This is a galaxy brain power move by @cz_binance that also makes me a little nervous.Not saying this will happen but you can imagine a future in which exchange-owned mining pools prioritize their own transactions or even censor transactions to competitor exchanges.”
Zhao, who earlier that day had tweeted that the mining pool was coming soon, replied by asking if there weren’t “better things to worry about.”
He said, “Wouldn’t it be cheaper to just pay higher fees for the transactions we want to prioritize? Both financially and in development/management costs?”
There were also concerns raised about Binance’s vertical integration.
It now has an exchange, options trading, margin trading, loans, staking, a blockchain of its own (Binance Chain) and a digital asset (BNB).
Even that was before Binance’s other big news today.Digital wallet and Visa prepaid card-issuer BitPay announced that it will add BUSD to its ecosystem soon, meaning BUSD will be usable for retail payments in every U.S.state.
Twitter user David Mihal noted Binance’s role in the hostile takeover of the Steem blockchain by Justin Sun’s Tron, calling it “a dangerous precedent.” Sun conned Binance and Huobi into voting all of their users’ Steem tokens to support the takeover, claiming he was fighting off an ongoing hack.
Both exchanges reversed their votes the next day.
But the damage was done and a great portion of the Steem community followed a hard fork of the blockchain to a new version, Hive, which duplicated all tokens except the about 20% owned by Tron.Those new tokens went up 600% after Huobi listed them on April 23.Zhao had apologized for his company’s part in the takeover, and today, Binance added its own listing .
Having a halving
The May 12 Bitcoin halving is the third planned reduction of the number of bitcoins rewarded for solving a proof-of-work problem and mining a new block on the Bitcoin blockchain.The reward started at 50 bitcoins at the genesis block, and is currently 12.5 bitcoins.After May 12 this will decrease again, to 6.25 bitcoins—currently $about $48,000.
These reductions were built into Bitcoin by its pseudonymous creator, Satoshi Nakamoto.It happens roughly every four years.There will only be 21 million bitcoins mined in total.
Specifically, they have seen rapid increases in the value of bitcoins, as the supply is decreased—theoretically making them scarer and thus more valuable.In fact, that has been the case.
Within a year of the Nov.28, 2012, halving, Bitcoin shot up from around $11 to more than $1,000.The July 9, 2016, halving saw an increase from about $700 to more than $2,500 in the same time frame.You live in interesting times
Binance noted that the “previous two halving events were linked to rapid changes in the entire cryptocurrency industry,” and that “the third halving event for Bitcoin will bring its own set of opportunities and challenges.”
Most notably, there is widespread regulation of the cryptocurrency industry coming around the world as exchanges are increasingly falling into line with the same know you customer (KYC) rules traditional financial institutions must follow in order to comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) laws.
Facebook’s extremely controversial Libra stablecoin project also drew a massive amount of attention from national and international regulators, elected officials, and central bankers to the cryptocurrency business in general.
The growing interest in the cryptocurrency market by both large institutional investors , and a far broader swath of retail investors is adding to that regulatory pressure as well.
The other major change is the broad movement of other cryptocurrencies from Nakamoto’s proof-of-work block creation system to a proof-of-stake model, which requires far less energy than the pollution‑heavy, country-size demands of Bitcoin’s current system.With the number two cryptocurrency, Ethereum, switching to a proof-of-stake model , far more attention will be drawn to it in coming years.
And, of course, there’s the unknown and largely unknowable impact of the ongoing financial crisis due to the coronavirus pandemic-induced shutdown of much of the world’s economic activity.Leo Jakobson
Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel.He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics.Disclosure: Jakobson owns no cryptocurrencies..