Vitalik Buterin, ethereum’s inventor, has stated that criticisms of Proof of Stake (PoS) that the rich get richer is one of the less good criticisms.
“Proof of Work is the rich get richer squared, so if we can get to the rich get richer to the power of one, that’s already a substantial improvement,” he said.
Speaking during a fireside chat in Zug, Buterin said Bitmain’s two mining pools collectively control 43% of the hashrate. “If you add in ViaBTC, which is basically kind of affiliated with Bitmain, all together you have 53%,” he said.
That’s more than 51%, with a fairly small mini-cartel having 53% according to Buterin. However, officially and as far as we’re aware, Bitmain only controls BTC.com, Antpool and ConnectBTC, which in combination did rise to 43%, but not beyond 51%. Nishant Sharma from Bitmain, says:
“They are separate pools by code (one of them being completely open-source), by team, by offices and by location of those offices (different countries).”
Buterin, however, says there would be an incentive to hide decentralization due to public relations issues.
“Back in 2013 when Ghash had 51%, that was a big, huge scare moment. Everyone really complained a lot and eventually Ghash backed down and voluntarily dropped themselves to 40%, but now it’s basically happening a second time and people just aren’t talking as much,” he says.
This time around, these aren’t just pools, Buterin says. They may be technically pools as other people can participate, “but it’s basically a plausible deniability strategy where a very large portion of that is hardware owned by a very small number of concentrated actors.”
From the outside, you can’t tell how much of the hashrate is an actual pool and how much is “just a front for their hardware,” Buterin says before further adding:
“There’s clearly large incentive to hide the level of centralization in Proof of Work for public relations reasons, and clearly even despite that, we can tell that this very coordinated group of pools together has half of the hashpower.”
Moreover, he said there is geographic centralization. A flood in Sichuan knocked off 20% of bitcoin’s hashpower, Buterin said. So Proof of Work is the rich get richer squared, he concluded.