Coinbase Detects Centralization in Zcash Network
Coinbase, a leading cryptocurrency exchange, has issued a warning about the centralization of mining power in the Zcash network. The exchange observed that ViaBTC, a single mining pool, controls 53.8% of the Zcash network hash rate. This level of control raises concerns about a potential 51% attack, where one entity has majority control over the computational power on a blockchain network.
Measures Taken by Coinbase
Upon discovering this centralization, Coinbase has implemented measures to mitigate the risks. The confirmation requirement for Zcash has been increased to 110 block confirmations, resulting in longer deposit times. Additionally, Coinbase has temporarily suspended market bids for Zcash trading and shifted to a “limit-only” mode to protect its trading community from potential market disruptions.
Coinbase has also engaged in discussions with ECC (Electric Coin Company) and ViaBTC to address the issue and seek a more distributed mining power.
ECC Responds to Coinbase’s Actions
The Electric Coin Company (ECC), which oversees the development of Zcash, has publicly responded to Coinbase’s actions. ECC emphasized that Zcash is a decentralized network with no lead developer or controlling organization. They acknowledged the lack of finality in proof-of-work blockchains and proposed their Trailing Finality Layer (TFL) as a solution.
ECC is actively researching a transition from proof-of-work to proof-of-stake mechanism for Zcash. Nathan Wilcox is leading these efforts and working on the TFL hybrid-PoW-PoS approach to introduce finality to the network before a complete shift to proof-of-stake.
Implications and Future Direction
While ViaBTC’s control raises concerns about a potential 51% attack, experts note that it is a mining pool rather than a single malicious miner. The situation has sparked discussions about the vulnerabilities of proof-of-work blockchains and the possibility of transitioning to proof-of-stake systems.
Coinbase remains committed to monitoring the situation closely and adjusting its risk mitigation strategies accordingly. Meanwhile, ECC continues to pursue its TFL proposal and research on the transition to proof-of-stake.
Hot Take: The Need for Decentralization in Crypto Networks
The recent centralization of mining power in the Zcash network has highlighted the importance of decentralization in cryptocurrency networks. Coinbase’s actions to mitigate the risks associated with a potential 51% attack demonstrate the need for proactive measures to protect blockchain networks.
ECC’s response, including their focus on finality and exploration of proof-of-stake mechanisms, reflects the ongoing efforts to improve the security and efficiency of crypto networks. As the crypto community debates the future of blockchain consensus mechanisms, it is crucial to prioritize decentralization and find innovative solutions to ensure the integrity of these networks.
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