London-based Bitcoin exchange and cloud mining services provider, Cex.io announced on Tuesday that they were lowering the maintenance cost from $0.18 to $0.105 for 1 GHS per month. This reduction in maintenance cost comes after the company upgraded its hardware for mining bitcoins in the cloud. In addition, the hardware upgrade would also enable the company to arrange the lowest possible electricity consumption costs for hosting the ASICs.
The mining of bitcoins requires huge consumption of electricity. It also involves constant monitoring of the hardware. As the mining of bitcoins becomes more and more difficult to do individually, there has been a shift toward mining in pools and also in the cloud. Mining service providers make use of hardware that is highly efficient for bitcoin mining in the cloud. Efficient mining hardware uses an integrated circuit known as an ASIC (Application-Specific Integrated Circuit).
In the cloud, the miner transfers the costs of maintaining the hardware and the electricity costs to the service provider. As the level of mining difficulty increases, better hardware and higher electrical power are needed for mining to be profitable. Cloud service providers are constantly looking for better hardware and cheaper electricity, so as to cut on costs.
In a press statement released Tuesday, CEX announced that they had signed a contract with an unnamed hardware vendor. The hardware vendor would ship a range of the most powerful and efficient hardware equipment to the company’s data centers.
The company also announced that the new maintenance cost would come into effect from Wednesday, September 24th, 2014. In explaining the move, CEX CIO, Jeffrey Smith explained that the company was facing “tough conditions” due to the increasing difficulty of mining and the low price of bitcoin. According to him, the two conditions had made cloud mining less profitable.
As of September 25, 2014 CEX’s mining pool GHASH.IO commands 24% of the network hashrate, which is the largest among the known blocks followed by Discus Fish, Eligius and BTC Guild. Network hashrate is the measuring unit of the processing power of the Bitcoin network.
In June 2014, the GHASH.IO’s percentage had climbed to 40% leading to fears of what is called a 51% attack. In an interview with CCN, Cex.io’s Chief Information Officer, Jeffrey Smith said that the company did not have “any intentions” of executing a 51% attack as it would do serious damage to the Bitcoin community of which the company was “part of.”
A 51% attack is a single entity contributing more than half of the network hashrate, and using that ability to manipulate the blockchain. An entity with 51% of the network hashrate can potentially prevent any transactions from receiving confirmations, thereby invalidating them. This invalidation would translate into users not being able to send bitcoins from one address to another.
The other thing that a 51% attack can allow an entity to do is to reverse transactions they have sent during the time they are in control of the network. This ability would potentially enable double spend transactions on the network.
It is a constant concern in the Bitcoin community that the currency remains decentralized. In the event of a 51% attack, confidence in the use of bitcoin would be lost, and the currency would quickly devalue. As the community continues looking for a long-term solution to the 51% issue, it will be up to each miner to strike a balance between the rewards and the size of the mining pool they may choose.
Images from CEX.io, Shutterstock.
Last modified: September 26, 2014 11:10 UTC