Bitcoin centralization and governmet control

[a_6apcyk]

I want to discuss the vision of bitcoin future. One of the main idea of Bitcoin was decentralization, but now we can see that all hashrate is concentrated in pools, which works under some jurisdiction, pay taxes, burn electricity - they are legal. As far as bitcoin becomes more and more legal in different countries the governments will be going to control it.
Lets imagine that pools have some blacklist of addresses for which they do not process transactions. This list can be presented from some international bitcoin control organization (it's just imagination for now!) that, for example, fights with financing of terrorism. As pools are legal organizations they will have to do what they were said.
Worse scenario is that pools will be able to proceed only whitelists of addresses and legal lightning channels.
As pools control almost all hashrate there will not be any real chance to find block outside the pool.
I think bitcoin is potentially very colt controlled thing. What do you think about it ?

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[Poker Player]

I find it interesting what you are saying but I'm not sure wether the pools can do that. Can miners choose which transactions to process? Let's see if someone with more technical knowledge can enlighten us.

Anyway, it's a bit fantasy, as all the pools would need to act as a whole, and there would still be some miners outside the pools.

[a_6apcyk]

I find it interesting what you are saying but I'm not sure wether the pools can do that. Can miners choose which transactions to process? Let's see if someone with more technical knowledge can enlighten us.

Anyway, it's a bit fantasy, as all the pools would need to act as a whole, and there would still be some miners outside the pools.

Miners of course can choose which transactions to process

[a_6apcyk]

Unfortunately I can not post images yet. Here you can see hashrate distribution among pools https://www.blockchain.com/charts/pools . As far as I know (not sure) most pools are Chinese. So China already control most hashrate. And as for me it is a little bit scary 

[cryptomaniac_xxx]

Unfortunately I can not post images yet. Here you can see hashrate distribution among pools https://www.blockchain.com/charts/pools . As far as I know (not sure) most pools are Chinese. So China already control most hashrate. And as for me it is a little bit scary 

But there are also a lot of mining farms outside of China, and we don't know what is on the government's mind, they have been thinking of banning bitcoin mining already, and that's why those big miners farms in China has a plan B already. So I would agree with your concern, but so far there is no incentive either from the government or the Chinese miners itself to sabotage bitcoin so I think we are safe by now. So that is the safe guard we have right now, Bitmain and other mining pools gains nothing about bitcoin centralisation or even a 51% attack.

[Argoo]

As long as there is a decentralized cryptocurrency, governments will try to control it as much as possible. This process of confrontation will last for a very long time, since, indeed, the cryptocurrency has many opportunities to resist such control.
Over time, a certain golden mean should be worked out in this matter, which should generally suit both cryptocurrency owners and the government.

[a_6apcyk]

Unfortunately I can not post images yet. Here you can see hashrate distribution among pools https://www.blockchain.com/charts/pools . As far as I know (not sure) most pools are Chinese. So China already control most hashrate. And as for me it is a little bit scary 

But there are also a lot of mining farms outside of China, and we don't know what is on the government's mind, they have been thinking of banning bitcoin mining already, and that's why those big miners farms in China has a plan B already. So I would agree with your concern, but so far there is no incentive either from the government or the Chinese miners itself to sabotage bitcoin so I think we are safe by now. So that is the safe guard we have right now, Bitmain and other mining pools gains nothing about bitcoin centralisation or even a 51% attack.

As for now I fully agree with you. But let's try to look a little farther. Bitcoin is going to become legal everywhere, because there is no another way for countries. They can not just close their eyes and say "We do not know what is Bitcoin. We do not accept it" like it was some time ago. To become legal it must be regulated by laws. The only way to regulate it is to regulate miners.
As for miners, they will have to concentrate in pools, because is no another way to find a block in acceptable time. The pools will work in some jurisdiction under it's laws. So they will have to do what they will be said by laws of this jurisdiction. Furthermore if for example USA decide that pool do something wrong, the pool owners will have to live the rest of their life at some forgotten island or in American prison. That's why in my opinion it will not be easy for big pool to change it's jurisdiction.
There is one other anxious scenario. Today mining equipment is build on top of current technological level and there is little manufacturers in the wold who can produce chips for ASICs. Let's imagine that bitcoin will be legally recognized money. So ASICs can be recognized as money development equipment, mining can be recognized as money production. And all of this can be strongly regulated by laws - production, sellings, and mining process.
In theory the whole process of bitcoin lifecycle can be controlled   

[a_6apcyk]

As long as there is a decentralized cryptocurrency, governments will try to control it as much as possible. This process of confrontation will last for a very long time, since, indeed, the cryptocurrency has many opportunities to resist such control.
Over time, a certain golden mean should be worked out in this matter, which should generally suit both cryptocurrency owners and the government.

But what form this golden mean will have? What do you think ?

[cryptomaniac_xxx]

Unfortunately I can not post images yet. Here you can see hashrate distribution among pools https://www.blockchain.com/charts/pools . As far as I know (not sure) most pools are Chinese. So China already control most hashrate. And as for me it is a little bit scary 

But there are also a lot of mining farms outside of China, and we don't know what is on the government's mind, they have been thinking of banning bitcoin mining already, and that's why those big miners farms in China has a plan B already. So I would agree with your concern, but so far there is no incentive either from the government or the Chinese miners itself to sabotage bitcoin so I think we are safe by now. So that is the safe guard we have right now, Bitmain and other mining pools gains nothing about bitcoin centralisation or even a 51% attack.

As for now I fully agree with you. But let's try to look a little farther. Bitcoin is going to become legal everywhere, because there is no another way for countries. They can not just close their eyes and say "We do not know what is Bitcoin. We do not accept it" like it was some time ago. To become legal it must be regulated by laws. The only way to regulate it is to regulate miners.

I totally agree that there should be regulations as least by government standards.

As for miners, they will have to concentrate in pools, because is no another way to find a block in acceptable time. The pools will work in some jurisdiction under it's laws. So they will have to do what they will be said by laws of this jurisdiction. Furthermore if for example USA decide that pool do something wrong, the pool owners will have to live the rest of their life at some forgotten island or in American prison. That's why in my opinion it will not be easy for big pool to change it's jurisdiction.

But as long as there are countries willing to accept mining pools  then it could be very easy for miners. Just like what happen to many exchanges in the 2017-2018 bust. Majority of them move to a safe haven like Malta.

There is one other anxious scenario. Today mining equipment is build on top of current technological level and there is little manufacturers in the wold who can produce chips for ASICs. Let's imagine that bitcoin will be legally recognized money. So ASICs can be recognized as money development equipment, mining can be recognized as money production. And all of this can be strongly regulated by laws - production, sellings, and mining process.
In theory the whole process of bitcoin lifecycle can be controlled   

Yes, and that is the economics of bitcoin, it's lifecycle. Bitmain and Canaan are already a billion dollar business. I think what we need though is many players to get into the picture to move away from the concentration of mining pools in one place - China.

[AnonBitCoiner]

As long as there is a decentralized cryptocurrency, governments will try to control it as much as possible. This process of confrontation will last for a very long time, since, indeed, the cryptocurrency has many opportunities to resist such control.
Over time, a certain golden mean should be worked out in this matter, which should generally suit both cryptocurrency owners and the government.

Bitcoin is the decentralized currency and it was not able to control by the government as of now.This made bitcoin unique from other cryptocurrency.
Some government legalized the bitcoin and try to get the tax for it.By legalizing ,the flow of bitcoin is some what control by some government.

[dothebeats]

I want to discuss the vision of bitcoin future. One of the main idea of Bitcoin was decentralization, but now we can see that all hashrate is concentrated in pools, which works under some jurisdiction, pay taxes, burn electricity - they are legal. As far as bitcoin becomes more and more legal in different countries the governments will be going to control it.

The good thing is that at the first hint of control and strangulation from local governments, mining operators are already starting to look for areas/countries wherein this problem is non-existent. Just look at mining operators from China and Russia for example. Some have moved to other parts of Europe and some have decreased their gears on the said countries and moved the bulk of their equipment elsewhere. Like you and me, most miners do not want to be dictated on what to do and how much do they want to give the government for taxes. They simply move and settle elsewhere.

Lets imagine that pools have some blacklist of addresses for which they do not process transactions. This list can be presented from some international bitcoin control organization (it's just imagination for now!) that, for example, fights with financing of terrorism. As pools are legal organizations they will have to do what they were said.
Worse scenario is that pools will be able to proceed only whitelists of addresses and legal lightning channels.
As pools control almost all hashrate there will not be any real chance to find block outside the pool.
I think bitcoin is potentially very colt controlled thing. What do you think about it ?

People can easily circumvent this by creating new addresses. That simple. Also, given the whole address space of bitcoin is 2^160, that's literally inexhaustible and no amount of law enforcement can ever comprehend just how many that number is really in the real world. While measures would surely be put into place to combat money laundering and fraud in the space, I think it would not extend more than that since it's practically impossible to contain bitcoin and its working parts individually or as a whole. Bitcoin is, by design, fragmented and decentralized so as to avoid being manipulated and controlled by a central entity, and I think it has the capabilities to live true of its design.

[a_6apcyk]

People can easily circumvent this by creating new addresses. That simple. Also, given the whole address space of bitcoin is 2^160, that's literally inexhaustible and no amount of law enforcement can ever comprehend just how many that number is really in the real world. While measures would surely be put into place to combat money laundering and fraud in the space, I think it would not extend more than that since it's practically impossible to contain bitcoin and its working parts individually or as a whole. Bitcoin is, by design, fragmented and decentralized so as to avoid being manipulated and controlled by a central entity, and I think it has the capabilities to live true of its design.

The problem is not in generation new addresses, the problem is transferring bitcoins from existing addresses to any other. This is the point of possible control.

[7788bitcoin]

The problem is not in generation new addresses, the problem is transferring bitcoins from existing addresses to any other. This is the point of possible control.

This is the joke of the century, if you are not able to transact to new address then it means the network is dead and dusted. How do you think it will be proposed, the entire world will come out and control the miners and allow which coins to move and which coins will be stuck which is impossible in any aspect of imagination  .

If the government wanted to kill the network they could have done that when it started exploding, regulations is coming but that does not mean that the government will be controlling the entire network.

[stompix]

I want to discuss the vision of bitcoin future. One of the main idea of Bitcoin was decentralization, but now we can see that all hashrate is concentrated in pools, which works under some jurisdiction, pay taxes, burn electricity - they are legal.

Pools don't burn electricity the way you think, and pools are not owning the hash rate, in most cases it's miners that point their gear to a pool...which brings us to the flaw in your scenario...

Lets imagine that pools have some blacklist of addresses for which they do not process transactions.

At which point miners will be against this censorship which will, of course, hurt bitcoin and their profits and they will point their gear towards a pool that does not havea blacklist, easy as pie.

As pools control almost all hashrate there will not be any real chance to find block outside the pool.

As I said, pools don't control the hash rate, so, come with another scenario next time.

The only way to regulate it is to regulate miners. As for miners, they will have to concentrate in pools, because is no another way to find a block in acceptable time. The pools will work in some jurisdiction under it's laws. So they will have to do what they will be said by laws of this jurisdiction.

p2pool, problem solved 

[Harlot]

I don't think not processing their transactions is a good move at all because one of the biggest steps done by the authorities is tracking them through the transactions they have made and simply not just blacklisting all the transactions they are seeing.  I know the authorities have the power to do these but I don't think they want this to happen in the first place that's why we only see enforcement of KYC and AML procedures from happening to the Bitcoin network and also of course them knocking to all the crypto related services we have as the more coverage they have the more chances they can track down these criminals.

[a_6apcyk]

The problem is not in generation new addresses, the problem is transferring bitcoins from existing addresses to any other. This is the point of possible control.

This is the joke of the century, if you are not able to transact to new address then it means the network is dead and dusted. How do you think it will be proposed, the entire world will come out and control the miners and allow which coins to move and which coins will be stuck which is impossible in any aspect of imagination  .

If the government wanted to kill the network they could have done that when it started exploding, regulations is coming but that does not mean that the government will be controlling the entire network.

It is not joke at all. Just imagine situation in for example 10 years. Bitcoin is legal everywhere and miners are requlated by regional laws. Some international organization control miners in some way (for example in recommendation way). The purpose of this organization is to track "bad" addresses. At the same time some hacker have cracked some exchange and transferred  it's bitcoins to their own address. Everybody knows this address and organization adds it to some "black list". If any miner include the transaction from this address he will ne responsible for it. As for me I see this scenario quite realistic.

[a_6apcyk]

I want to discuss the vision of bitcoin future. One of the main idea of Bitcoin was decentralization, but now we can see that all hashrate is concentrated in pools, which works under some jurisdiction, pay taxes, burn electricity - they are legal.

Pools don't burn electricity the way you think, and pools are not owning the hash rate, in most cases it's miners that point their gear to a pool...which brings us to the flaw in your scenario...

Pools do not burn electricity. They create transactions using hash rate of miners. So it will be fair to say that they indirectly owning the hash rate.

Lets imagine that pools have some blacklist of addresses for which they do not process transactions.

At which point miners will be against this censorship which will, of course, hurt bitcoin and their profits and they will point their gear towards a pool that does not havea blacklist, easy as pie.

The lists will be very small against full transactions bandwidth. Therefore, using blacklists will not affect the income of miners.

From the other side the first thing that miners care of is their profit. If pool gives good fees miners will go to this pool, no matter if it is controlled by somebody or not.

As pools control almost all hashrate there will not be any real chance to find block outside the pool.

As I said, pools don't control the hash rate, so, come with another scenario next time.

Read above. Small miners can do noting with their hash rate without pools.

The only way to regulate it is to regulate miners. As for miners, they will have to concentrate in pools, because is no another way to find a block in acceptable time. The pools will work in some jurisdiction under it's laws. So they will have to do what they will be said by laws of this jurisdiction.

p2pool, problem solved 

Maybe. But I heard that miners always care about internet connection speed and quality for fast block propagation. p2p is always slower than direct connections. But maybe one of ways.

[Botnake]

I don't think not processing their transactions is a good move at all because one of the biggest steps done by the authorities is tracking them through the transactions they have made and simply not just blacklisting all the transactions they are seeing.  I know the authorities have the power to do these but I don't think they want this to happen in the first place that's why we only see enforcement of KYC and AML procedures from happening to the Bitcoin network and also of course them knocking to all the crypto related services we have as the more coverage they have the more chances they can track down these criminals.

True, blacklisting is not anymore necessary, what the government are really doing is they monitor transactions and if you do an illegal activities, it's easier to tract the transaction as it's in the public blockchain, we have regulated gambling sites, exchanges (local and international), and other forms, if they regulate that they can impose a KYC, yes, that's what they will do so if one would cash out from illegal source of transaction, they can easily find it.

if they'll ban mixers, that would make their job easier.

[a_6apcyk]

I don't think not processing their transactions is a good move at all because one of the biggest steps done by the authorities is tracking them through the transactions they have made and simply not just blacklisting all the transactions they are seeing.  I know the authorities have the power to do these but I don't think they want this to happen in the first place that's why we only see enforcement of KYC and AML procedures from happening to the Bitcoin network and also of course them knocking to all the crypto related services we have as the more coverage they have the more chances they can track down these criminals.

I like your answer very much. I think it one of the ways for "soft control". And as I know many countries spend a lot of money to make analytic, tracking and deanonimizing tools for bitcoin blockchain. Moreover, bitcoin is no so good as anonymous currency as it is always said. As for governments the only thing you have to do as to bind as more addresses as possible to real persons. And that is all you need. Because all correlations and interconnection are already written to blockchain for forever.

[stompix]

Pools do not burn electricity. They create transactions using hash rate of miners. So it will be fair to say that they indirectly owning the hash rate.

Nope, the term will be more like renting rather than owning, miners can quit and turn to a different pool at any time for a better fee or better chances, so nope, they don't own anything.

The lists will be very small against full transactions bandwidth. Therefore, using blacklists will not affect the income of miners.
From the other side the first thing that miners care of is their profit. If pool gives good fees miners will go to this pool, no matter if it is controlled by somebody or not.

Would you use a currency that can simply freeze your funds at any time just because a foreign government has said so? What would then be the difference with fiat? Once this happens the price will drop, hurting longterm miners a hundred times more than a few small tx, think what the implication longterm mean.
Also in 12 years, we're going to see 3 more halvings the reward will go from 6.25 to 0.78, right now the fees are indeed just 8%, but they will probably dominate even before than, most likely even in 2 halvings, and in 4 they will be the main income.

Maybe. But I heard that miners always care about internet connection speed and quality for fast block propagation. p2p is always slower than direct connections. But maybe one of the ways.

Once miners switch to p2p then traditional pools will have no hashrate to find blocks, no matter how fast their connection is.