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Bitcoin is largely controlled by a small group of investors and miners

techspot.com

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Re: Bitcoin is largely controlled by a small group of investors and miners

#291

Post by 3np »

YossarianFrPrez wrote: post #102
jonas21 wrote: post #25

The Techspot article is a summary of this Bloomberg piece: https://www.bloomberg.com/news/articles/2021-10-25/bitcoin-s... which is itself reporting on this paper from the NBER: https://www.nber.org/system/files/working_papers/w29396/w293...

Interesting quotes from the first section of the paper: "We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity." "We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miner…

> The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity

This is incorrect. Replace "miners" with "mining pools" and they're closer to the mark. What's happened is that the block construction (done by the pool operator) and the PoW (done by miners) are mostly decoupled. Some miners will run everything themselves, but they're not represented in those numbers. (There are some things that can change here in stratum2, the new protocol used for coordinating mining pool s, but whatever)

Sure, pool operators can abuse their power. But as the paper shows, hash power is liquid; miners do move between pools for various reasons.

While there is a bit of a systemic risk there, it's not necessarily as bad as it might seem.

IMO the biggest risk here is censorship; and we saw how responsive miners are to things like that earlier this year with the whole "OFAC-compliant" debacle.

Re: Bitcoin is largely controlled by a small group of investors and miners

#292

Post by glenvdb »

FabHK wrote: post #235
YossarianFrPrez wrote: post #102

Earlier quoted context omitted.

Interesting quotes from the first section of the paper: "We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity." "We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miner…

> just 0.1% (about 50 miners) control close to 50% of mining capacity So, the much-vaunted "mathematical guarantee" that only 21m BTC will ever be mined depends on the benevolence of those 50 miners not to fiddle with the code base. Makes perfect sense to trust those honourable individuals more than the central bankers in control of fiat. /s

You've revealed plainly that you haven't got a clue what you're talking about.

Miners can't change the protocol of the entire network.

The only malevolent thing they could do is perform a 51% attack if they all colluded together. And even that wouldn't achieve much, so there's not much incentive to do it. All they can do is a double spend. They would've been better off spending that energy on mining blocks to be rewarded with the Bitcoin subsidy.

Re: Bitcoin is largely controlled by a small group of investors and miners

#293

Post by jornhub »

tinus_hn wrote: post #265
CompuHacker wrote: post #256

Earlier quoted context omitted.

If those 50 people start playing by different rules, the sum of the value of the two resulting currencies will probably be less than that of BTC as it stands now.

No, if they start to play with different rules their mined blocks will be refused by everyone on the network and be worthless. That’s not what the issue is with concentrated mining power.

If they have the majority mining power they could equally well undermine the security of the original branch, rendering it worthless as well. Miners have interests, core developers have interests, bitcoin users have all kinds of interests, none of them on their own decides what will happen. Without miners there is no bitcoin, but neither is there without developers or without users. Would you feel safe having your savings stored in the original bitcoin fork, knowing there is a mining cartel that holds 50% mining power? Some users will accept reasonable changes that weere lobbied for by the miners, if that means they get to enjoy the security provided by the miners.

Re: Bitcoin is largely controlled by a small group of investors and miners

#294

Post by glenvdb »

EdwardDiego wrote: post #172
rglover wrote: post #61

Earlier quoted context omitted.

A decentralized money that government can't touch is the definition of a populous utopia in money terms. Bitcoin, by nature, is the most democratic form of money to ever exist on the planet. That more people don't get behind it and buy at least a little bit is mind boggling. Government fiat is and always will be a source of controlling the population and limiting their ability to build wealth.

Bitcoin is money now? I feel that the one thing we've definitely established so far is that it is absolutely not a viable currency.

The people of El Salvador would appear to disagree.

Re: Bitcoin is largely controlled by a small group of investors and miners

#295

Post by nuerow »

fsflover wrote: post #219
TeMPOraL wrote: post #178

Earlier quoted context omitted.

If Bitcoin is comparable to USD, then there's nothing justifying its use over USD, with its associated ludicrous waste of energy and environmental impact.

The government can print USD for themselves, effectively stealing money from everyone through inflation. With bitcoin, even "small group controlling 90%" can't do that.

> The government can print USD for themselves, effectively stealing money from everyone through inflation.

Not quite. The only people bitten by inflation in the long run are those who stockpile cash and intend to perpetually live off capital gains without contributing anything to society. Meanwhile, the vast majority, which are either salaried employees or own businesses, see both their income and expenditures adjusted to inflation.

This is in fact one of the often ignored aspects of inflation, as well as taxes: a way to mitigate or avoid concentrations of wealth detrimental to society.

Re: Bitcoin is largely controlled by a small group of investors and miners

#296

Post by H8crilA »

glenvdb wrote: post #292
FabHK wrote: post #235

Earlier quoted context omitted.

> just 0.1% (about 50 miners) control close to 50% of mining capacity So, the much-vaunted "mathematical guarantee" that only 21m BTC will ever be mined depends on the benevolence of those 50 miners not to fiddle with the code base. Makes perfect sense to trust those honourable individuals more than the central bankers in control of fiat. /s

You've revealed plainly that you haven't got a clue what you're talking about. Miners can't change the protocol of the entire network. The only malevolent thing they could do is perform a 51% attack if they all colluded together. And even that wouldn't achieve much, so there's not much incentive to do it. All they can do is a double spend. They would've been better off spending that energy on mining blocks to be rewa…

Well, Ethereum miners decide on changing the protocol like all the time.

Re: Bitcoin is largely controlled by a small group of investors and miners

#297

Post by haakon »

krageon wrote: post #218
janandonly wrote: post #211

Earlier quoted context omitted.

The current BTC blockchain size is 422GB [1] so that easily fits on a single 1TB SSD. How is that "too large" ? [1] https://bitcoin.clarkmoody.com/dashboard/

Who has ~250 euros (excluding the machine this SSD has to be in) to drop on a random hobby?

It doesn't have to be an SSD. My node runs on a regular, inexpensive mechanical disk.

Re: Bitcoin is largely controlled by a small group of investors and miners

#298

Post by dkersten »

ianai wrote: post #285
nuerow wrote: post #141

Earlier quoted context omitted.

> For Tesla, one single shareholder holds 17% of the whole company. If said investor abused his leverage to manipulate the stock value to dump his holding on unwitting buyers prior to making it tank, he would be facing a prison sentence. In BTC that would be just another uneventful day.

I often wonder about this. How liquid are these coins? Ie if it’s a currency then converting every single coin to cash should result in no change to the conversion rate. If exchanging x coin to cash will net about the going rate, but ax results in dramatically less than a*conversion rate then it’s not a currency. If the difference is even further diminished it challenges the notion of it as a store of value. Edit-Thi…

> if it’s a currency then converting every single coin to cash should result in no change to the conversion rate

Is that how it works for currency? I would think that if people tried to sell every single Euro for USD, the conversion rate would absolutely change.

Re: Bitcoin is largely controlled by a small group of investors and miners

#299

Post by qeternity »

krageon wrote: post #274
qeternity wrote: post #241

Earlier quoted context omitted.

> the problem is not missing regulation, the problem is the rich decide on regulation and this regulation helps keep them rich. Ok - so the rich have decided on regulations which are not the ones that are best for everyone. So…missing regulations? By definition, if we have the wrong regulations, then we’re missing the correct ones. Capital gains taxes are lower for a specific reason: the capital that was initially in…

The original capital is not taxed, capital gains is.

Where do you think the original capital came from? When you buy shares of AAPL, you paid ordinary rates on income which you used to buy the shares.

Re: Bitcoin is largely controlled by a small group of investors and miners

#300

Post by danbruc »

dannyw wrote: post #287
arcatek wrote: post #275

Earlier quoted context omitted.

If they start to play with different rules, one of the hard fork remaining branches (or both) will be refused by everyone on the network and be worthless. There's no telling whether it'd be the "hijacked" branch or the original one - assuming they control 50%+ of the mining power, there's a decent argument that the remaining miners would follow their lead if only to stay on the largest branch.

What miners do is irrelevant: the code known as bitcoin, with a 21M hard cap, simply will reject any block that creates more than its allowed bitcoins as invalid, the same way it rejects a random string of bytes as invalid.

Depending on your definitions this might or might no be true but it also might be totally irrelevant.

There is a protocol and system specification. There are implementations of that specifications. There is a distributed system running those implementations. And the distributed system has a state. Each of those can change and each of those or a combination of them could arguably be called Bitcoin.

If everyone would run new implementations with a different coin cap, you can argue that it is no longer Bitcoin because Bitcoin is a very specific specification with a 21M coin cap, but this would have little bearing on the actual situation.

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