Bitcoin Forum

Centralization of Bitcoin seems hard to avoid with how bitcoin mining works. Small companies are able to compete with larger cooperation due to faster decision making, patents on innovations, working climate, and so on. However, I see it very hard to get an edge as a smaller miner competing with larger mining operations, this should in theory make the network end up with only one or a few big miners.

Why would people trust these few operators to run the network, instead of for example big banks who issue their own "Bankcoin" on the bank's own servers? The "Bankcoin" could probably go mainstream quicker if trusted, since it would be able to be as fast and cheap as Bitcoin. If bitcoin becomes too centralized it should also become more easy to regulate, since only a few players control the network, this regulation would then probably effect both Bitcoin and "Bankcoin" in the same way, this could remove the price advantage of Bitcoin vs credit cards or "Bankcoin". "Bankcoin" should be able to implement other features that bitcoin has as well, for example the inflation and total amount.

What I mean by "Bankcoin" is a coin that is not linked to fiat currency, just in the same as bitcoin, the supply and demand sets the price. Bitcoin as a technology can maybe still have other uses, this is only about the currency.

I really want to believe in Bitcoin's future as a currency, but I can simply not figure this one out so I hope to get a good discussion about this issue!

Good questions

They would not.

It will. The right question is when?

The 51% attack threat is sensitive and solved by the big miners' own discipline. I don't think it is a problem.

The post is not only about the possibility of a 51% attack, being centralized makes the whole network vulnerable if the big miners for some reason was shut down by regulators, among other risks.

Being more easy to regulate due to centralization would also, risk it being more regulated as a currency, making it as costly to use as a normal currency.

Welcome to Bitcoin!

Isn't there something we can do about it?

Im told Bitcoin is "programmable money".

Does the dev team know that?  :)

-B-

Well... Nobody's perfect...

Have you read the whitepaper? https://bitcoin.org/bitcoin.pdf

It discusses how centralized payment processors are fundamentally flawed because they provide a centralized entity to dispute transactions with. A "bank" cannot even issue such a currency due existing regulation; the SEC would likely view such a currency as an unlicensed security offering. Look into IPO regulation if you're interested. It's an expensive thing.

Furthermore Bitcoin's finite eventuality is not centralization. Miners are profit seekers. Mining profits are a function of exchange rates and market share. The difficulty for solving a block has been growing exponentially and unsustainably. A small operation can enter and exit the mining pool more easily than larger operations which require long contracts and massive overhead. Therefore, as Bitcoin's price fluctuates, we should witness a dynamic mining pool where smaller operations who pool together have an advantage over larger operations.

Additionally these new ASIC chips will only become cheaper as economies of scale comes into effect, and manufacturers cannot increase processing power indefinitely. Therefore we should see the mining pool consist majorly of the price efficient, older chips in the near future as the marginal return on more advanced chips continues to decrease for the market's purposes.

The growth in mining we are witnessing now is not indicative of how the market will act in the long run.

The flaw in Bitcoin is the fact that human beings are involved.

If anyone has any desire to see the world take a giant leap forward, they must allow bitcoin to function in its original form. In its original form, all sort of advancements, efficiencies and other major techological good events will occur. The current monetary system is so beyond broken it can not be fixed, and to try and regulation bitcoin like the current system is just a waste of time. Just ban bitcoin completely or let it does what it is designed to do... Motheruckers!

mining indurstry works fine .
The only thing i care about is the centralized pricing market , exchanges are not btc believers , they are manipulating the price and sucking blood from whole btc world . Community should develop p2p trading market ASAP  >:(

bank coin, thats exactly wat fiat already is

the bank infastructure is not needed anymore or the workers,

Crypto is self managed and secured, a goverment take over of

banking is needed to wind down the opetations and keep some

in reserve for when fiat might be needed for natrual disasters etc

Is centralization even that big of a deal? People don't care if Bitcoin is centralized or not- what matters is the utility of the technology and how well it works.

This is incorrect, extremely so. Without decentralization, why would anyone care about Bitcoin?

Decentralization is important to me in crypto, without decentralization Bitcoin would not have much value over traditional fiat currencies other than the fact that it can be exchanged in a digital form, which fiat already has (eg. PayPal).

The technology already exists: ZeroReserve (https://bitcointalk.org/index.php?topic=295930.0). Just needs a few more volunteers for beta testing.

Nothing is stopping the banks from creating their own altcoin currency, and I can almost bet before they would ever adopt Bitcoin or accept it, they would indeed create their own. I would love to see the ANN page on that coin HAHA. as far as small miners, if you have discipline and a good business mind any small miner could become a large miner. It takes time, intelligence and hard work, but it can be done. I think once this is all on going in a few more years the ones left mining will be the ones who stuck it out used their heads and did their homework.

I dont think anyone would be trusting any person or company to run the network, you would be trusting their machines to do the work. after the next halving in rewards you will indeed see a sifting of miners.A LOT of miners will at that point will have no choice but to give up. because even then mining in a pool for a small miner will be useless. If not in the next halving most certainly the halving after that.

The 51% attack will become the talk of the town once miners start leaving. and what pools and miners that are left behind will be your network. If a bank controls the 51% attack threat you can bet your sweet ass they will attempt to make an attack, thats how banks are, they dont care about anyone or anything but themselves. I think if anyone would be the ones to attempt a 51% attack it will be a bank before anyone else.

you kmake some very good points which just goes to show time is rapidly running out for those who wish to get into mining for BTC. Because soon it is going to be to late to start.

In fact, individual miners with free electricity could lasts much longer in a hash war. When difficulty skyrocket, large mining operation have huge amount of electricity and cooling cost,  they will very quickly become unprofitable, unless all their cost in a few years are covered by a VC

Where can I find free electricity? I want gigawatts!

If the big miners were shut down, difficulty would go down and everyone would start mining again. You do understand about difficulty, right?

+1 VTD!

And why would I trust the big Bank and their servers?

The only flaw in bitcoin is it let ppl way below the IQ mean curve to join.....case in point:

The OP is stupid enough to think of Bankcoins.... as an alt crypto currency. The retard didnt even see his "USD" in his bank is exactly that "bankcoin". Why would they need a blockchain a "trustless distributed public ledger" when all they do is internal book keeping (the only miner is the bank)? Their current system is doing exactly that, processing tx and printing money (debt)


Yeah, the only flaw in bitcoin is user like you OP

Yes, I think this would happen as well, if the network persisted a shutdown. However, the main point is that I don't see the advantage a centralized bitcoin have over a centralized altcoin issued by a company. A company should be able to compete with a centralized bitcoin, since both the few bitcoin "mining factories", and the company who hosts the coin should be regulated in the same way. On top of that the company might have a built up userbase that will help that coin become larger than bitcoin.

I'm not saying that anyone would, what I'm saying is I don't see why people would trust a centralized bitcoin composed by only a few big "mining factories" more than they would trust a centralized coin issued by a company.

Yes, a currency issued by a centralized entity is very similar to the bank's internal systems, which a centralized bitcoin would be as well, do you not agree?

If a centralized bitcoin has some benefits over the system they currently use, why do you not think they would issue their own coin with the same benefits, and why would people trust it less than a centralized bitcoin?

No benefits.

Bitcoin mining is somehow centralized many years since people started poiting their miners to pools, but Bitcoin itselves cannot be centralized, Bitcoin is based on trustless public ledger, very different from  currency issued by a centralized entity where the ledger is not public and obviously transactions can only be processed by centralized entity, because noone else have access to the ledger.

Lower fees is a benefit.

Bitcoin network needs energy. While the mining profits are covering electric bills the fees are low.
This can not be forever. Who will pay for electricity?

I agree with you OP but some people are in denial about the inevitability of Bitcoin's centralization. They will be their own undoing IMO, but time will tell. One thing I don't agree with you though is that this is the only flaw Bitcoin has. There are many flaws, being stubborn is one of them, as you will see momentarily as the Bitcoin zealots show up to put lipstick on their pig. It is sad that they are more worried about applying make up over the problems than fixing the issues. I was once a Bitcoin supporter, but I can't stand the stubbornness in the community anymore. I stick around here in hopes that they can come to a realization of reality.

actually what  breaking the legs, is the power consumption

the energy companies  could give a discount to those with mining

There are loads of "solo miners" out there, who would be too glad, if the "Big miners" stop mining. When that happens, for whatever reason, the difficulty would go down, and a lot of solo miners, who stopped mining, or who is only doing it for a hobby, would start mining again.

We decided to back digital crypto currencies, for the ease of use, and the fact that we have control over our own money. {No more monthly banking fees, eating up your capital, month after month}

Even if only 2 people in the world, run a mining rig, will it still be seen as decentralized.

The way that the protocol are written, encourage more people to mine. {It's like a lottery, the more people playing the less the reward, but once only a few people play, the bigger the reward, and people knows this, so if these "big" companies exit for some reason, more people would get back in, to claim a bigger % of the reward}

No... Just no.


How can you convince them if it is unprofitable, as it has been since ASICs hit these scene?

Calling you a retard would be an insult to other retards out there.

There is no such thing as centralized bitcoin idiot. Having bitcoin mining centralized by several entities is inevitable and it doesnt not mean centralized bitcoin. From the moment i read about bitcoin, i see bitcoin mining will come to this due to simple economy if bitcoin ever takes off.

If one of these bitcoin entities do evil to the bitcoin network, the community would react and their mining power will be nullified. Now compared to a bank, where they can hold your fund, block transactions, what the fuck do you do? They're the only sole control of the coin.

.... What difficulty decrease? http://bitcoindifficulty.com/

The difficulty you posted, will show a increase, because the combined network power increased.  ;)

Once the network power decrease, when the big companies leave, as in his hypothetical scenario, the difficulty will decrease. {Adapt to the change}

Pool mining does not equal centralized mining. The cost to switch pools is near zero and it is extremely easy to redirect a miner's hashpower to another pool. If/when a pool starts to act in a way that the miner does not agree with the owner of the miner needs to do little more then a few clicks to change pools.

As long as the above remains true, pooled mining will not be a threat to decentralization.

Mining will be profitable for ASIC companies long after consumers. Due to economies of scale, they can build ASICs at a fraction of the price they sell them for, and thus expand their farms for very little costs. This idea that people (consumers) will keep mining even when incredibly unprofitable is crazy... What is the point when you can buy more Bitcoins with $100 than you can mine with $100 in electricity plus equipment costs? The ASIC manufacturers and huge mines are setting up in places with super cheap power and cheap operating expenses (cold places using nature to cool equipment), the average consumer cannot afford to do this.

here we go again.... sigh.

Bitcoin is not stubborn, it has a set of rules that it needs to follow (the protocol) which it does.

Centralization is not an issue because miners can change pools very easily, and hashpower is essentially fungible.

I have seen you post in several threads and all that you do is troll bitcoin to promote your scamcoins

I agree with this. As long as miners have control over their equipment centralized mining will not be an issue. The only potential problem is cloud mining as miners are not able to change pools effectively giving the cloud mining company control over the hashpower

well, i'll watch this one, cuz i don't understand at all

I've been thinking about this. A couple years back i remember it was profitable to mine bitcoins with my graphics card, that meant it was very decentralized as anyone could mine bitcoins profitably. Then ASIC's came along, centralizing the mining to large scale mining farms. The competition has become so high that only a few farms are left.

Illustation example of what is going on

2009 - 2012         2013 - 2016       2017
100000 miners > 10000 miners > 100 miners


So what is the problem with this? The distribution of new bitcoins is becoming centralized and the risk of a 51%+ attack is increasing.

I just read Gavin Andersons writeup on centralized mining and i've noticed he does not take into consideration the one sided distribution of bitcoin which is a HUGE deal.

https://bitcoinfoundation.org/2014/06/centralized-mining/

This is not a problem.

This is.
And we can do nothing with it. Sooner or later it will happen

From a technological perspective its not a problem but from an economics perspective it is.

There will be no perspectives at all after 51% attack to bitcoin.

Why are all bitcoins fatal flaws discovered by brand new users?
If you are concerned about centralization then why are you not mining? You are likely not even running a full node. You are allowing any centralization to take place. In the bitcoin system this is the only way for it to happen.

By the way, what we are calling centralization is not actually centralization. Miners are decentralized and spread around the world. If the concern is a 51% attack then you might want to ask yourself "why would anyone do that?" It would cost millions (a billion?) and you wold receive nothing of value for your efforts. People who have millions of dollars did not get rich writing checks. It is illogical to launch such an attack.

Because we have clear view.

Because we do not like any ponzi

Because of no reason for us to help early adopters to take profits

No. It is your problem. Not our problem.

It does not matter where sha256 is calculated. The attacker should have control how the block is assembled.

The right question we ask is: how to avoid any problems to our pockets?

It would cost nothing. You are blind if you do not see how to do it without expenses.

You will see it very soon. Trust me.

I don't think you understand how bitcoin works. There is a link in my sig to the whitepaper. It will answer many of the questions you are confused about.

I think you do not understand the market price of switched off asic  ;D
This is what Satoshi Nakamoto did not tell you in his papers

Update: for example https://bitcointalk.org/index.php?topic=813649

I think that the "flaws" that are "found" in bitcoin are really not flaws, but rather, something that people that are trying to promote alternative currencies will try to pass off as a flaw. This seems to be especially true for PoS algo-type shitcoins.

One thing that your point failed to mention is that the reason that mining is (closer to being) centralized (then some people want) is because of pools, however pools are merely agents that can be "fired" on a moments notice if they were to act in a way that the miners do not like. I am almost guarantee you that a miner who has several thousand dollars worth of equipment mining on a specific pool will monitor the pool on, at least a daily basis to check for any signs of the pool acting improperly and upon discovery of such evidence would pull their equipment from such pool and redirect such mining power to a backup pool.

Today pool mining really does not make up a very large percentage of total mining capacity, so I don't think it is that big of a threat. Also most cloud mining services have 'private' pools that only the hashpower that is sold by the cloud mining company can mine on. As long as the cloud mining company continues to sell cloud mining power they will have an incentive to act in honest ways as if they are not honest then people will not want to continue to purchase mining power from them.

You're not the only one man. I remember when you supported BTC and wanted to make a physical coin. Things have really started to go downhill around here and for BTC this year.