Coinbase Addresses Zcash Hash Power
Coinbase, one of the leading cryptocurrency exchanges, has recently taken proactive steps to address a significant imbalance in the hash power distribution within the Zcash network. This move is part of Coinbase’s ongoing commitment to security, decentralization, and compliance with its digital asset listing standards.
Balancing Security and Decentralization in PoW
In a Proof-of-Work (PoW) blockchain like Zcash, miners compete to solve complex mathematical problems to validate transactions and add new blocks to the blockchain. However, if a single miner or mining pool controls more than 51% of the network’s hash power, it can pose serious security risks, potentially allowing manipulation of the blockchain, including double-spend attacks and transaction censorship.
Coinbase’s Blockchain Security team conducts rigorous security assessments before adding any blockchain to its exchange. One crucial criterion is ensuring that no single entity has centralized control over the network. This involves checks for central authorities that could exercise undue influence over the blockchain. Coinbase also continually monitors existing blockchain networks for any material changes that might impact security assessments. For PoW networks, they employ specialized hash power heuristics designed to detect significant shifts in mining power. If a network’s hash power becomes excessively centralized, Coinbase implements appropriate measures to protect its users.
Zcash Deposit Safety
Recently, Coinbase identified a situation in which a single mining pool, ViaBTC, controlled over 51% of the hash power in the Zcash network. In response, Coinbase implemented several mitigations, including increasing the Zcash confirmation requirement to 110 blocks to reduce the risk of double-spending or fraudulent transactions. This extension raises the deposit time from approximately 40 minutes to about 2.5 hours. Additionally, Coinbase temporarily placed its Zcash markets in a limit-only state to minimize the impact of any price volatility.
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Furthermore, Coinbase engaged in discussions with the Electric Coin Company, the organization behind Zcash, and ViaBTC to promote a broader distribution of mining power. Coinbase expressed its concerns regarding the risks associated with mining centralization and provided recommendations for potential solutions. Coinbase’s ultimate goal is to achieve decentralized Zcash mining. In the meantime, they believe that the mitigations they have implemented adequately protect their users. They remain optimistic about their ongoing collaboration with external partners, as they collectively work towards enhancing the security of all participants in the cryptocurrency ecosystem.
