Analysis of Binance Pool, mining leader F2Pool: Engaging in a price war that will disrupt the overall mining industry

Binance Mining Pool officially launched at the end of April, clearly indicating that this influential institution in the cryptocurrency industry is continuing to expand its influence. F2Pool, which has long dominated the mining pool business, has specifically analyzed Binance's entry into the mining industry, suggesting that Binance may turn the mining industry into a short-term speculative game, potentially dragging down the circular economy established by the mining industry.

• F2Pool continuously downplays the established impression of China's high hashing power
• F2Pool implies that Binance could manipulate prices to develop its mining pool business

Binance's First Goal: Major Exchange Mining Pools

F2Pool's Head of Communications, Malcolm Cannon, elaborated on Binance's development in the mining industry, stating:

The impact of Binance on miners may be minimal. Initially, Binance targeted miners from other exchange mining pools (such as Huobi and OKEx), even directly recruiting personnel from Huobi and Bitmain to form their own business development team.

Although Binance's mining pool is in its early stages, there have been shifts in global hashrate distribution since its launch. The hashrate proportions of Huobi and OKEx have decreased by several percentage points. OKExPool has decreased from 6.74% in April to 4.5%; Huobi has decreased from 5.92% to 4.0%.

Meanwhile, Binance's hashrate is approximately 1.04%.

Malcolm Cannon believes that Binance's target is the exchange mining pools. It seems that, besides the decrease in hashrate of exchange mining pools, traditional mining pools like F2Pool and SlushPool have seen an increase in their hashrate proportions. Cannon pointed out:

Exchanges hold large reserves of Bitcoin and other cryptocurrencies. They can attract exchange users to join their mining pools for extended periods at a slight loss or near cost, while traditional mining pools compete in different ways.

Edward Evenson, Director of Business Development at SlushPool, also mentioned in the HASHR8 Podcast focusing on mining pool business that exchange mining pool operations have short-term advantages. He believes that Binance's Bitcoin reserves allow them to engage in price wars, as Binance has the ability to drive prices down. Evenson stated:

When you have reserves of 80,000 Bitcoins, you can easily do whatever you want, especially as Binance vertically integrates into various aspects of the industry.

China Becoming the Largest Mining Power, Is This a Concern?

Another reason why Binance focuses on the Chinese mining market is that the majority of their team and institutions are primarily based in China. This also leads to an interesting indicator: 65% to 70% of global hashrate is in China.

Note: The basis for this 65% figure may come from the recent Bitcoin hashrate map released by the University of Cambridge. However, this map only uses data from three major Bitcoin mining pools (BTC.com, Poolin, and ViaBTC), which collectively account for only 37% of the total hashrate and may not fully represent the actual situation of the Bitcoin network. Therefore, it is necessary to objectively assess the issue of China's dominant hashrate.

Philip Salter, head of cloud mining platform Genesis Mining, is optimistic about the argument of excessive concentration of mining power in China. He believes that the focus should be on "how to treat miners" rather than where the company (mining farm) is located. He emphasized:

Those who founded Bitcoin companies in Asia, whether mining pools or manufacturers, are "Bitcoin people." They are no different from Bitcoin people in Europe, North America, or other regions.

The Real Threat: Price Competition

F2Pool's Head of Communications, Malcolm Cannon, pointed out that the issue of centralization cannot be viewed based on geographical location. Bitcoin has no nationality, and mining pools do not need to be divided by geography. With the development of mining facilities in North America, large miners operate a significant number of low-cost energy mining machines in China, Russia, Kazakhstan, and other places.

Cannon believes that Bitcoiners cannot control the risk of centralized mining power. All economic factors, including miners looking to profit from mining, the surge in mining machine manufacturers, and the mining advantages in China, will continue to maintain this geographical imbalance in hashrate distribution. He emphasized:

The threat posed by Binance is not geographical; we are concerned about whether this crypto giant will drag down the existing mining pool ecosystem. The real risk is that Binance will turn mining into a short-term speculative game, where the only rule is how low a fee you (the mining pool) can offer. What if mining pools dedicated to miners' long-term success are sidelined? This is similar to the wonderful game created by Satoshi Nakamoto: the market determines everything.

Although F2Pool is a leading mining pool, it seems to believe that Binance will use its exchange advantage to reshape the mining industry. In contrast to F2Pool's concerns, The Block's Research Director Larry Cermak is entirely pessimistic about Binance's mining pool. In a previous report, Larry believes that joining the mining race at this point is too late and that Binance will not be able to catch up with early exchange mining pools.