How Decentralized Is Bitcoin? It Isn’t.

How Decentralized Is Bitcoin? It Isn’t.

By FarewelltoMinds | Farewell2Minds | 19 May 2020


How Decentralized Is Bitcoin? It Isn’t.

One of the primary arguments over Bitcoin having value, aside from its actual value derived from the production process itself, is its characteristic of being decentralized. That is to say, it cannot be controlled by governments; a bank cannot close your wallet; a police force cannot freeze your wallet or prevent you from sending your bitcoin wherever you please.

But this is how things are supposed to work. Is this really the case?

Case in point is the question of centralized mining. Mining Bitcoin is the process of producing bitcoins through computer processing and electricity consumption. This is what gives Bitcoin inherent value. But if the mining process itself is centralized, due to the inherent tendency for capital to accumulate, then this calls into question the actual decentralized nature of Bitcoin.

As mining becomes more difficult, less profitable mining firms go under and more profitable mining firms increase their hold on the ecosystem. Capital begets capital. As the difficulty increases allowing only those with the most capital to spend on mining equipment, the rewards go to those centralized characters. This is a process of monopolization that is mirrored in any other capital market, as capital accumulation takes places and a single group of monopoly capitalists own the entire market.

So it should be no surprise that Bitmain has continued to grow in the latest days.

BTC.com and AntPool are both mining pools owned by Bitmain. Bitmain and F2Pool now control a shared 44% of the mining hashrate.

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How can anything be considered decentralized when the commodity's production is itself incredibly centralized? 

How can anything be considered decentralized when, as the miners can control which blocks are mined, the chain itself becomes closer to being compromised everyday?

Add to this the distribution of wealth in Bitcoin

As Bitinfo charts says. I'll leave it to you to decide.

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The same data but as a pie chart, detailing % of wallets based on their amount of bitcoin

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FarewelltoMinds
FarewelltoMinds

Trying my best to stay rational in an irrational world.


Farewell2Minds
Farewell2Minds

Crypto news, unheard of alt coins, investments as gamblings and self-hating decentralized financial musings

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