Gary Gensler: "Bitcoin is not that decentralized"

[Abiky]

In a recent interview with SEC chairman Gary Gensler, there was something that caught my attention. The chairman stated that "Bitcoin is not that decentralized". That's "partially due to the prominence of centralized crypto exchanges". You can read all about it here: https://www.cnbc.com/2024/02/14/cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-squawk-box-today-.html

I'm afraid he's right, especially when CEXs hold most of BTC's circulating supply (eg: Binance). It's even worse now with the recent approval of spot Bitcoin ETFs by the SEC. Institutional investment companies like BlackRock, VanEck, and MicroStrategy are accumulating large amounts of the cryptocurrency.

We're essentially selling our BTC to companies driven by mainstream governments' own interests. With this, Bitcoin's true value proposition has failed (banks win). At least, the code is open source. If BTC becomes compromised, what's stopping us from moving to a more decentralized chain in the future (Litecoin, Monero)?

Your input would be greatly appreciated. Thank you.

[1714887344]

1714887344

[NeuroticFish]

Your input would be greatly appreciated. Thank you.

I've seen a lot this misconception about Bitcoin decentralization. Actually I've just answered in another topic about this.
Gary Gensler doesn't understand that the decentralization of bitcoin is about the full nodes and the miners involved, not about the number of wallets containing big funds (and frankly, those are still plenty too).
And allow me to be a bit mean: maybe he confused it with Ethereum.

[_act_]

Bitcoin is decentralized

Centralized exchanges and Bitcoin ETF which are centralized are not part of what that makes up the bitcoin network. If we are talking about bitcoin, we should be talking about the network and noncustodial wallets.

And allow me to be a bit mean: maybe he confused it with Ethereum.

No, he knows that bitcoin is decentralized but centralized exchanges and other centralized ways of holding bitcoin by other users are centralized is what he was talking about.

[Frankolala]

Because bitcoin is stored on CEX doesn't change the nature of bitcoin from decentralized to centralized, and what I understand is that a lot of people do not understand that the bitcoin network makes it decentralized due to the way it is designed for nodes to control the whole system.

The only way that bitcoin can be weak in decentralized nature is if all the mining pools are bought over by government, where they choose whose transactions that they will add to the blockchain, but as long as miners don't accept such, bitcoin remain decentralized. This is why one must use a self custody wallet, and use DEX.

[Abiky]

I've seen a lot this misconception about Bitcoin decentralization. Actually I've just answered in another topic about this.
Gary Gensler doesn't understand that the decentralization of bitcoin is about the full nodes and the miners involved, not about the number of wallets containing big funds (and frankly, those are still plenty too).
And allow me to be a bit mean: maybe he confused it with Ethereum.

The network may be "decentralized"...but what happens when big companies, governments, and institutions accumulate all of the BTC (or at least, most of it)? Without people "owning" BTC (self custody), the blockchain will become the sole playground of the aforementioned entities. I could be wrong, though. 

[Lucius]

Not so long ago, GG had some much worse statements about Bitcoin, and this one about decentralization doesn't really make much sense if we know that decentralization is actually about something else, and not about who and where keeps someone's private keys. Perhaps it is a much bigger problem for us that miners from China (and other parts of the world) have moved to the US, and we can never know what the politicians in that country may come up with literally overnight. If Mr. T becomes president again, who knows what crazy ideas he might come up with.

As for who buys or sells BTC, it's a free market and no one can do anything there, and no matter how you turn it, someone won't like it. Let's remember what the reactions are when a bank refuses to process crypto transactions, or when a well-known banker says something negative about Bitcoin - and now that they have begun to speak and act positively, we again wonder where this is going.

Fortunately, not everyone sells, and it remains to be seen what will happen when (if) supply becomes greater than demand.

[kryptqnick]

As usual, Gensler is cautious about Bitcoin, making a disclaimer that ETF approvals don't mean approval of Bitcoin by the SEC, as well as reiterating that Bitcoin is among speculative assets, not backed up by anything or issued by any authority.
As for a comment on decentralization, he clarified that his point was that "finance tends toward centralization since antiquity", so it's not as much about Bitcoin as it is about his belief that humanity historically gravitates toward centralization of finances. Later, he follows up with a bit of US history, about the idea of 'buying the basket' instead of buying individual stocks, and how that democratizes but also centralizes finance.
To me, it looks like it's just his overall position that centralization is natural and perhaps even positive, so he views Bitcoin in light of that position.
But as long as people are legally allowed to store their coins in non-custodial wallets, I think it's fine that some choose centralized platforms.

[franky1]

We're essentially selling our BTC to companies driven by mainstream governments' own interests. With this, Bitcoin's true value proposition has failed (banks win). At least, the code is open source.

open to read as a book. but there is a tiered hierarchy of moderation and recruitment process for the privilige to be able to offer proposals to evolve the source code of activated rules of the network.


..
when economic nodes (NYA) have the sway of what transactions they prefer to use and see wiling to ban pools blocks that dont comply to a economic node preference

when the source code is literally in the hands of a brand that purposefully named itself CORE (center)

when the mining is no longer solo but pooled..

when full nodes offer features to disable peer services such as full archive seeding and also backward compatibity so that older nodes get stripped data or data thats not required to be validated fully..

.. whats left?

we need to stay vigilant and actually look for the changes and risks, rather then play dead and say "its decentralised simply because that was a buzzword of 2009 so must be true now"

[adaseb]

The large amount of bitcoins held at CEX like Binance or etfs like IBIT are not owned by one entity. They are their customers funds. So what you are saying doesn’t apply.

When it comes to decentralization I think the way the hash power is distributed is more important. I remember back in the early days there was over 51% of hashpower in a single pool. We don’t have that problem anymore. China has less hashpower than before and it’s more distributed throughout the planet.

[franky1]

The large amount of bitcoins held at CEX like Binance or etfs like IBIT are not owned by one entity. They are their customers funds. So what you are saying doesn’t apply.

#not-your-key-not-your-coin
having a balance on a offchain system is an IOU not actual ownership (then note instances of MTGox(people havnt got 'their' coin))

and share holders of ETF have no owner claim of bitcoin whatso ever, so not even a IOU of bitcoin(note SEC regs of not allowing in-kind redemption)

we need to stay vigilant and actually look for the changes and risks,, scrutinising them..  rather then play dead and say "its decentralised simply because that was a buzzword of 2009 so must be true now"

[Stalker22]

The network may be "decentralized"...

Bitcoin network IS decentralized! Dont twist the facts.

but what happens when big companies, governments, and institutions accumulate all of the BTC (or at least, most of it)? Without people "owning" BTC (self custody), the blockchain will become the sole playground of the aforementioned entities. I could be wrong, though. 

First of all, big companies, governments, and institutional investors cannot forcibly take your coins. So if you are an individual who wants to keep your BTC in self-custody, youll always have that right...  unless you opt to sell off your stash, that is!  Sure, selling might mean rebuying at a higher price later, but thats on you, buddy.  You cannot have a global decentralized internet currency without a free market.

Really, the only way bitcoin loses its decentralization is if the bulk of node operators voluntarily shut down their setups.  But I dont see that happening in the foreseeable future.

[Zaguru12]

If as much as we can agree that the total decentralization people talk bitcoin isn’t that, but no financial network actually beats bitcoin network decentralization currently. What Gensler is thinking is definitely just about the price of bitcoin and not the network, all this entities mention can only decide to affect bitcoin price If they all decide to either sell (dump) or buy (pump) bitcoin at the same time and as I said it needs to be a consensus decision still which shows a bit of decentralization too not like fiat that a single government structure can decide on. For them to affect the network they need to control more than the total hash power of the network and that’s still limited to some decisions as they also need other nodes to accept some consensus rule, this is decentralization to me even if it is not total decentralization.

[franky1]

I said it needs to be a consensus decision still which shows a bit of decentralization too not like fiat that a single government structure can decide on. For them to affect the network they need to control more than the total hash power of the network and that’s still limited to some decisions as they also need other nodes to accept some consensus rule, this is decentralization to me even if it is not total decentralization.

the network (due to the backward compatibility trick) no longer needs the majority of the masses of user full nodes to be ready to then activate a new feature
the power triangle is now more centered around economic fullnodes(services, not users), pools, and dev politics of core

we have seen proven instances of the economic nodes clearly stating they would reject pools blocks that did not comply to the mandatory changes envisioned by core

so stay vigilant and scrutinise things when these games are played, dont just settle for letting it happen coz "ideology" "trust"

[legiteum]

He's absolutely right, in the context in which he was speaking.

In all practicality, most holders of Bitcoin (in terms of numbers of individual holders) use some kind of centralized entity to hold their private key, which is in turn connected to your name, address, social security number, and so on.

In other words, most Bitcoin investors hold Bitcoin in the same way they hold AAPL or MSFT.

That's not in any remote way, "decentralized". Most investors don't even know what a "private key" is, let alone keep it physically on their person.

As I wrote in the Anon Paradox, most average consumers don't want the kind of "privacy" that means escaping the government, they just want their actions kept from everybody else but a government with a court-ordered subpoena. For the latter, the only people that actually care about that are those who go against the law where they live, and most people don't want to tangle with their government.

So Bitcoin's decentralized architecture is not a value to most people who invest in Bitcoin, so it makes sense that most people don't use it that way.

Today, in practical reality, Bitcoin for most people is an investment in a brand, or an abstract idea, or a name that they know and think will go up in value. They don't know what it means and they don't care.

Yes, the blockchain architecture enables a decentralized ledger, and yes, technically Bitcoin is decentralized, but that's not the way consumers use it, and that's what somebody like Gary Gensler concerns himself with in his role as SEC chair.

[Bitco55]

I believe Bitcoin's decentralization is a perspective thing, cause of its arguments and counterarguments. It's not static, it's kind of a dimensional discussion affected by various factors. If Gary Gensler thinks Bitcoin isn't decentralized anymore, then that's his opinion. There are lots of people out here and there who believe Bitcoin is very much decentralized and all hoarding through the mining in Big firms doesn't affect its decentralization.

Even if it's becoming centralized slowly, there are certain factors that completely hinder it from becoming so. So, I believe there's no need to worry about Bitcoin's decentralization.

[alastantiger]

In a recent interview with SEC chairman Gary Gensler, there was something that caught my attention. The chairman stated that "Bitcoin is not that decentralized". That's "partially due to the prominence of centralized crypto exchanges". You can read all about it here: https://www.cnbc.com/2024/02/14/cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-squawk-box-today-.html

Isn't this the Gary Gensler was was teaching a bitcoin/blockchain course at MIT some years ago? He is well versed in bitcoin and cryptocurrency and there is no way that he doesn't get what bitcoin is, a decentralized system. That is an open and transparent system without human decision makers over ones that have them. But why does he continue to be against it? Is this politically motivated because he is gunning for the sit at the treasurer or is it because the big financial institutions are scared of bitcoin? This is for Gary, can the banks and the governments provide a true ledger and let's compare with bitcoin?

[franky1]

a decentralized system. That is an open and transparent system without human decision makers

not verbatim, but you are using promotional words from 15 years ago. not looking at the reality of how bitcoin has changed and evolved over those 15 years

who are you even speaking to when you speak the promotional words.. people reading this forum have already heard of bitcoin so dont need the promotional speak. they are looking for the actual current information to do their due diligence.. risk mitigation

we should actually stay vigilant and scrutinise things when things change, dont just settle for letting it happen coz "ideology" "trust" "promotional words tell me"

[cabron]

In a recent interview with SEC chairman Gary Gensler, there was something that caught my attention. The chairman stated that "Bitcoin is not that decentralized". That's "partially due to the prominence of centralized crypto exchanges". You can read all about it here: https://www.cnbc.com/2024/02/14/cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-squawk-box-today-.html

Isn't this the Gary Gensler was was teaching a bitcoin/blockchain course at MIT some years ago? He is well versed in bitcoin and cryptocurrency and there is no way that he doesn't get what bitcoin is, a decentralized system. That is an open and transparent system without human decision makers over ones that have them. But why does he continue to be against it? Is this politically motivated because he is gunning for the sit at the treasurer or is it because the big financial institutions are scared of bitcoin? This is for Gary, can the banks and the governments provide a true ledger and let's compare with bitcoin?

He jumped out to the other side of the fence when Binance rejected his application on Binance. He wants CZ to regret the rejection and he seems to have won, CZ was gone.

If BTC becomes compromised, what's stopping us from moving to a more decentralized chain in the future (Litecoin, Monero)?

Well, there's Dogecoin too. There are lots of altcoins to move to but they will not stop taking control of which coin we may try using. I think if we all start using memecoins, they will like it.   BTC may look to be decentralized. It is meant to be that way but a lot of changes are happening just when institutions are coming.

[The Cryptovator]

Technically, Bitcoin is decentralised, always on the code. But centralised organisations are taking control over Bitcoin by accumulating a large number of bitcoins. We can't ignore this, even though we love Bitcoin. But if you don't hand over your bitcoin to a centralised organisation, then they won't control it. It means when your bitcoin is held on a non-custodial wallet, it's truly decentralised for you. We can't stop anyone from accumulating Bitcoin since it's continuously trading on the market. 

[criptoevangelista]

In a recent interview with SEC chairman Gary Gensler, there was something that caught my attention. The chairman stated that "Bitcoin is not that decentralized". That's "partially due to the prominence of centralized crypto exchanges". You can read all about it here: https://www.cnbc.com/2024/02/14/cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-squawk-box-today-.html

I'm afraid he's right, especially when CEXs hold most of BTC's circulating supply (eg: Binance). It's even worse now with the recent approval of spot Bitcoin ETFs by the SEC. Institutional investment companies like BlackRock, VanEck, and MicroStrategy are accumulating large amounts of the cryptocurrency.

We're essentially selling our BTC to companies driven by mainstream governments' own interests. With this, Bitcoin's true value proposition has failed (banks win). At least, the code is open source. If BTC becomes compromised, what's stopping us from moving to a more decentralized chain in the future (Litecoin, Monero)?

Your input would be greatly appreciated. Thank you.

He apparently understands absolutely nothing about the functioning of the bitcoin ecosystem, all he needs is to have as many bitcoins as possible to be centralized, totally wrong, and this man only opens his mouth to talk nonsense... well, what to say... lol .... Even a parrot talks... Don't take him so seriously, he (gary gensler) doesn't know what he's talking about.