Sparkpool – one of the oldest Ethereum mining pools – is shuttering its services to be both “maximally compliant” with new regulations and “ensure the safety of user’s [sic] assets” against seizure by the Chinese government.
The Hangzhou-based pool will begin off-boarding Chinese users first on September 24 followed by international users on September 30, according to a message released on the pool’s Telegram and Twitter accounts. The pool mines roughly 20% of all Ethereum blocks.
After the announcement, some 10 TH/s of its 150TH/s hashrate left the pool, according to Pool Watch. Ethereum lost little hashrate as miners moved to secondary pools.
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Questions and more questions
Sparkpool’s sudden closure leaves a lot of serious questions without answers. For example, which pools will pick up its hashrate? Will F2Pool follow suit? What will happen to Chinese miners without a native pool option? Will miner revenue rebound with Chinese Ethereum miners forced offline?
There’s also more corporate considerations, such as Babel Finance’s white labeled Ethereum pool, run by Sparkpool. The pool makes up 2.7% of Ethereum’s hashrate, as of writing. Babel recently left Hong Kong for Singapore – will it have to dissociate its pool service?
And then there’s the question of China’s receptiveness to Ethereum going forward. Ethereum co-founder Vitalik Buterin famously learned Chinese in order to spread his innovation East. The loss of Ethereum mining in China would be a sizable blow to onboarding Chinese users to the protocol.
First Bitcoin, now Ethereum?
If Sparkpool’s closure is any indication, the CCP means serious business. While the early summer months saw industrial Bitcoin mines closed, this round led by the People’s Bank of China (PBoC) carries more danger for those involved in the industry at all. As CoinDesk’s Muyao Shen reported, crypto-to-crypto transactions are now illegal, as is working for an exchange headquartered outside of China.
Pool payouts would ostensibly fall under that new law. Authorities may not be interested in discerning between a pool operator and an exchange operator, either.
An attack on Sparkpool may hint at Chinese regulators growing impatience with the burgeoning home mining scene in China – one that has taken on a new life after June’s Bitcoin mining ban. As The Block’s Wolfie Zhao reported, Chinese miners are increasingly booting up GPU farms in homes where they are unlikely to be noticed compared to industrial data centers. Pools are an obvious attack surface, due to their centralized nature.
Sparkpool’s ancillary services are also in limbo, particularly popular gas tracker GasNow or private relay network Taichi Network. Both have become popular apps for decentralized finance (DeFi) traders and would be sorely missed if lost with SparkPool’s shutdown.
At the end of the day, however, the loss of Sparkpool is perhaps more than anything a sign of the times. Regulatory clampdowns continue across the industry, grasping on any handhold available. Centralized entities beware.
Thanks to Wolfie Zhao for his thoughts.