Coinbase, a cryptocurrency exchange, has introduced precautionary measures in response to a situation where a single mining pool has gained control over 53.8% of the hash rate on the proof-of-work blockchain that supports the privacy coin Zcash.
Going forward, the exchange will require 110 block confirmations before validating a ZEC deposit, as explained in a blog post. This change will extend the deposit time from approximately 40 minutes to about 2.5 hours, with the aim of mitigating the risk associated with double spending, which arises when a single entity has 51% or greater control of the hash rate on a proof-of-work blockchain.
Additionally, Coinbase has transitioned its Zcash trading pairs to a “limit only” mode, preventing traders from placing market bids. This adjustment is intended to minimize the potential impact of market volatility, especially in the event of significant sales that may occur as part of a double-spend attack.
Coinbase expressed its concerns to Electric Coin Company, the creator of Zcash, and the relevant mining pool, ViaBTC, by reaching out to them.
“We shared our concerns around the risks of mining centralization and provided recommendations for various options that either party could implement to reduce the risk of a 51% attack,” the exchange stated.
The Electric Coin Company confirmed the discussions and mentioned that their proposal to implement a “Trailing Finality Layer” could potentially resolve the problem. This proposal represents a step toward transitioning Zcash from a proof-of-work to a proof-of-stake system.
Concerns About Mining Pool Control
ViaBTC currently has control over 53.8% of the Zcash hash rate, as reported by MiningPoolStats. In theory, this means that if the mining pool were to act maliciously, it could potentially execute double-spending attacks or engage in other harmful activities.
However, it’s important to note that this control doesn’t come from a single individual miner but rather from a mining pool. These pools consist of multiple miners who combine their resources to achieve a more stable income.
If the mining pool were to engage in malicious activities, individual miners might choose to stop using that pool and switch to a different one, which can help decentralize the network and reduce the risk of harmful behavior.