With the sudden rise of GHash.io as the number one mining pool, the 51% “problem” has again come to the forefront of people’s attention. It’s about time we pay attention ourselves and think clearly about this issue. At the outset, I have to say that I think this is a non-issue. What is surprising to me is how it is even an issue in the minds of the leaders of the Bitcoin movement themselves.
Now why do I think it is a non-issue?
Technically speaking it is clearly a problem: whoever controls the simple majority of hashing power CAN control the network. The question is, will the individual or group of individuals who gain such control ruin themselves? In the end, that is precisely what it means to bypass the rules that the network enforces on everybody: if you control the simple majority of hashing power, bypassing the rules is tantamount to ruining yourself.
Say you own 51% of a successful company. Will you do anything to ruin that company? I am not surprised that a lot of people think so. A lot of people think that capitalists are prone to fool people by building up the reputation of that company thereby increasing its price, and then all of a sudden sell its shares just to make a profit. Well, this does happen sometimes, but it very rarely happens to companies with a solid reputation.
The fact is that, in the short history of Bitcoins, one mining pool or another has been the number one. Previously the number one mining pool was btcguild.com. I believe that Btcguild could have attained 51%, but the Bitcoin community urged them not to, and Btcguild heeded the call. I had no problem with Btcguild gaining 51% or even more, and I don’t have a problem with GHash.io gaining such control now.
I believe that attaining 51% is untenable anyway. The natural tendency is for there to be several business entities (not a single entity) who dominate any sector of the economy by more than 50%. Such is the nature of competition when prices are in equilibrium: if attaining 51% is so profitable, the second best entity in the race won’t be far behind.
Looking at it from a philosophical perspective, in the long history of capitalism, the issue of 51% has always been there. It has come in several forms, but this persistent fear of a dominant force has appeared now and then. It has been a central thesis of most philosophers who have come and gone to attack capitalism, foremost among them being Karl Marx.
This fear of a dominant force is now even part of the body of ineffective laws that big companies in the U.S. have to comply with, in the form of the so-called Anti-Trust laws. I call these laws “ineffective” because these have been used mostly by lagging competitors to bludgeon highly successful companies. These laws have mostly not accomplished what these were intended for.