The Recentralization of Bitcoin: Wall Street Taking Over?
The recentralization of Bitcoin is taking place. This has nothing to do with the coin itself although I still maintain it is being hijacked by Wall Street. The problem is we are seeing the same thing at the mining level.
In this video I discuss a Forbes article that talks about this very topic. Most of the blocks are produced by only a few mining pools. This is becoming a major problem.
Here is the link to the article talked about in the video:
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You're absolutely right taskmaster Bitcoin is getting hijacked by Wall Street
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I actually thought that this development was the expected outcome, more than the actual coins being scooped up by Wall Street. The BTC difficulty is made to get harder over time. I didn't think that individual or small group of miners can continuously mine it. The amount of processing power needed to mine BTC will only continue to increase which requires a large amount of money.
The coin distribution really has no factor on the network. It does in terms of other utility but from a node perspective, the coins dont matter.
But those producing the hash rate, that is a different story.
Summary:
The host discusses an article from Forbes that examines the re-centralization of Bitcoin, which the host has previously referred to as the "hijacking of Bitcoin." The key points made are:
Bitcoin mining has become increasingly centralized, with a small number of mining pools controlling a majority of the hash rate. This goes against the decentralized vision of Bitcoin proposed by Satoshi Nakamoto.
The high costs of mining equipment have excluded average individuals from participating, leading to a concentration of mining power in the hands of a few large players, some of which are publicly traded companies owned by Wall Street.
This centralization of mining introduces counterparty risk and the potential for 51% attacks, undermining the core premise of Bitcoin as a trustless, decentralized system.
The host is skeptical of the claims made by Bitcoin maximalists and figures like Michael Saylor, arguing that Bitcoin is being co-opted by traditional finance rather than fulfilling its original purpose.
While Bitcoin could still be a successful tradable asset or investment, the host believes the base layer blockchain is flawed and that the network is becoming increasingly centralized, contrary to Satoshi's vision.
Detailed Analysis:
The host begins by discussing a Forbes article that examines the re-centralization of Bitcoin, a topic the host has addressed previously using different terminology such as the "hijacking of Bitcoin." The host argues that the ideas being promoted by Bitcoin maximalists have become "foolishness" at this point.
The host sets aside the discussion of Bitcoin as an investment or tradable asset, noting that the crypto community celebrated the approval of Bitcoin ETFs because of the resulting price increases, without considering the deeper implications. The host then delves into the core issue of Bitcoin's mining centralization.
According to the article, the host explains that Bitcoin mining has become highly concentrated, with 10 consecutive blocks being mined by a single pool, and 5 of those by the same pool. This goes against the original vision of Bitcoin as an alternative to fiat currency, as it introduces centralization and counterparty risk.
The host explains that the ability to mine Bitcoin was removed from the hands of average individuals due to the high upfront costs of mining equipment, which at one point was around $40,000 per miner. This effectively excludes most people from participating in the mining process, leading to a concentration of mining power in the hands of a few large players.
Furthermore, the host notes that many of these mining pools are publicly traded companies, meaning they are ultimately owned by Wall Street. This raises concerns about the potential for collusion or 51% attacks, as the host questions whether these large entities have the incentive to maintain the integrity of the network if they are reaping the majority of the rewards.
The host then delves into the core premise of Bitcoin, which was to provide a consensus mechanism without a centralized party. The host acknowledges that this was a breakthrough, as previous attempts at electronic money had failed to overcome the need for a centralized authority. However, the host argues that Bitcoin has now come full circle, with the network becoming increasingly centralized.
The host briefly discusses proof-of-stake as a potential alternative, but notes that the token distribution in proof-of-stake systems can also be problematic, citing the example of Ethereum where a small number of wallets control a significant portion of the network.
Ultimately, the host is highly skeptical of the claims made by Bitcoin maximalists, including figures like Michael Saylor. The host believes that Bitcoin is being hijacked by Wall Street and that the base layer of the Bitcoin blockchain is flawed, with the network being forced to push transactions to secondary layers due to the limitations of the base layer.
The host concludes by stating that while Bitcoin could still be a successful tradable asset or investment, the centralization of the network and the inability to effectively fork Bitcoin to maintain its decentralized nature are significant challenges that undermine the original vision of Bitcoin as a trustless, decentralized system.