Monday Mining Metrics: Are Mining Pools Centralizing?
Bitcoin Mining Update - 1/27/2025
Foundry Pool Mines 7 Consecutive Blocks
The USA-based Bitcoin mining pool, Foundry, mined seven consecutive blocks over the weekend. This resurfaced the conversation around Bitcoin’s decentralization, specifically as it pertains to mining pools and block templates.
If you’re unfamiliar with mining pools – why they are used and the various types – you can check out this video here. Briefly put, mining pools are used because they eliminate the “luck” element of Bitcoin mining that comes with “solo mining”; providing more consistent, predictable income.
For every Bitcoin block mined, the entirety of the Block Reward (3.125 BTC + Transaction Fees) is awarded to the miner who adds the block. Miners will use “pools” to combine their hashrate to mine for blocks together; splitting the payout in proportion to the computing power each miner contributes. Solo miners, those without a pool, are competing against the rest of the miners in the world to add a block. The chances of winning this competition are low, but the reward is high.
Almost all miners use a pool as the odds of mining a block solo are extremely low unless you are a large-scale miner with tens of millions of dollars worth of machines.
The chart below from braiins shows the current hashrate distribution by mining pool.
Upon first glance, it may seem like pools are a potential area of centralization for Bitcoin. However, this is not the case. Here’s why mining pools are not a point of centralization:
In the event that a pool begins censoring transactions, miners can easily redirect their hashrate to a different pool.
In the event that one pool acquired 51% or more of the hashrate, miners would be incentivized to redirect hashrate off of that pool, and they can easily do so.
Pools are not in control of the hardware and energy used for mining.
If you are a miner and you are concerned about pool centralization, then consider directing your hashrate to the Blockware pool.
On-Chain Transaction Fees Reach Multi-Year Lows
Presently, transaction fees on the Bitcoin blockchain account for roughly 1.5% of the entire BTC block subsidy. Transaction fees have not been this low since the bear market of 2022 — and this is certainly abnormal compared to previous Bitcoin bull markets. Previous bull markets resulted in a flurry of on-chain activity, which promptly caused an increase in transaction fees. Given the increasing degree to which much of BTC’s trading volume comes from ETFs and other securitized products, this is not a surprise. However, we do believe that if this bull market has a “parabolic top”, it will result in a major increase in on-chain fees. When more demand enters the Bitcoin market, price must get bid higher to incentivize holders to sell. We expect Bitcoin holders, specifically those with large quantities of coin in cold storage, will begin moving some amount of coins on-chain, to sell, if the price makes a big move, resulting in a rise in fees.
Because fees have yet to substantially increase as a result of BTC price action (2023/4 fee spike was the result of ordinals), that is yet another piece of data signaling that this BTC bull run has a lot of gas left in the tank.
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