Gary Gensler: "Bitcoin is not that decentralized"

[Casdinyard]

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.

It's certainly got some elements that you could mistake for being a little on the centralized side, but at the end of the day bitcoin is decentralized through and through. Like considering the fact that no one owns bitcoin besides those who had them in their wallets, are also far-reaching and global with little to no-wait time (in some cases let's be real here lol) sets the precedent that bitcoin's as decentralized as it can be. ETFs however would make you think it's centralized since now, companies could effectively sell bitcoins but at the end of the day, they aren't selling the coins, they are sellign you the rights to own the coin so you're basically paying for a title and not for the property/asset itself.

So yeah, Common Gary L. He's always painted bitcoin in a precarious spot ever since he stepped into the throne. I don't like how he's painting bitcoin to be when millions of people around the planet had benefited from it and none of this would've happened in the first place if bitcoin's unreliable and centralized. Let that sink in.

[1714744821]

1714744821

[legiteum]

So yeah, Common Gary L. He's always painted bitcoin in a precarious spot ever since he stepped into the throne. I don't like how he's painting bitcoin to be when millions of people around the planet had benefited from it and none of this would've happened in the first place if bitcoin's unreliable and centralized. Let that sink in.

I think the way most investors use Bitcoin today--wherein they don't physically hold their own private keys--demonstrates the exact opposite: that if Bitcoin were conceived as a reliable centralized system (e.g. like any standard financial institution), it would be far more popular and ubiquitous than it is today because it would actually work as a mainstream currency and not just an investment instrument.

Consumers don't care about technical terms like "decentralization", they just want an investment instrument that makes them a profit, and/or they want a cheap and fast means of performing anonymous transactions. Bitcoin can do the first, but it can't do the second. A currency that could do both, in my opinion, will eventually be much more popular than Bitcoin--and "decentralization" won't have anything to do with it.

[franky1]

for those still tying to quantify whats considered decentralised in regards to coin amounts:
 
if you look at the customer count total numbers of the 5 prominent bitcoin exchanges..

and then look at bitcoins UTXO count (excluding the silly ones of <900sats produced by ordinals junk dust creator)
the number of UTXO's are less then customer count of CEX

not all UTXO represent individuals..
so if we had say 100m viable countable UTXO to represent individuals. max.
then CEX customer count would need to be below 100m to be considered decentralised

[fzkto]

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.

It's certainly got some elements that you could mistake for being a little on the centralized side, but at the end of the day bitcoin is decentralized through and through. Like considering the fact that no one owns bitcoin besides those who had them in their wallets, are also far-reaching and global with little to no-wait time (in some cases let's be real here lol) sets the precedent that bitcoin's as decentralized as it can be. ETFs however would make you think it's centralized since now, companies could effectively sell bitcoins but at the end of the day, they aren't selling the coins, they are sellign you the rights to own the coin so you're basically paying for a title and not for the property/asset itself.

So yeah, Common Gary L. He's always painted bitcoin in a precarious spot ever since he stepped into the throne. I don't like how he's painting bitcoin to be when millions of people around the planet had benefited from it and none of this would've happened in the first place if bitcoin's unreliable and centralized. Let that sink in.

I don't know how he can consider something he says isn't decentralised dangerous. For example, the dollar is not decentralised either, or any stock exchanges are also fully centralised. I guess his words should not be taken seriously. Your bitcoins belong only to you and that is enough to understand that there is no centralisation here.

[tabas]

With that context he's saying about Bitcoin and exchanges, yeah, no need to argue as most of the centralized exchanges have been keeping a huge number of deposits from their customers. Even it is not from them, it's like a funnel that goes on them and so as Gensler says that it's sort of not actual decentralization, it goes with the system in the exchanges and shouldn't be on Bitcoin. Bitcoin alone is decentralized and that's why he's mixing it up to make it look like that Bitcoin is as what he says but in reality, there's an involvement with the exchanges and obviously, many have been depositing their Bitcoins there to sell or just simply hold which is a very wrong idea and we always give reminder not to keep it there.

Yeah I think hes just confusing everyone. Gensler's talking about exchanges holding a ton of Bitcoin which messes with the whole decentralization vibe. People dumping their BTC on exchanges is a problem. Remember not your keys not your coins! Keep that crypto safe in your own wallet, not on some exchange

IMO, it won't be avoided that he's going to talk a lot since he's part of the approval of the Bitcoin ETF spot which is beneficial to the price of Bitcoin with these applications that have been approved to contribute to its volume that we're getting right now. The effect might be for long term and the demand has been coping up high so, there could be some thoughts that let's just give it to him. But he should also stop nonsense arguments if he don't fully understand what he's saying but, he's the sec and he knows what he's doing and talking about based on his own perspective as he won't be sitting on that position for nothing.

[d5000]

when users of any level or miner want to withdraw coins from an exchange or to an exchange. they play to whatever the majority services use. else they cant do anything.

They can use another service, or even work with things like atomic swaps which are not censorable at all, if they have the keys for their coins or are able to withdraw them before the fork comes into effect. However, as I wrote what is correct that the majority of the users would not bother with that, or directly held their coins on an exchange so they are bound to the service's decisions. So in general I agree.

when services collaborate with core devs because businesses dont have their own dev team so rely on core as the reference development of software they rely on.. economic nodes just follow core dev politics or be left running with outdated code that doesnt fully validate everything

Not necessarily. A simple change in the core software, like a change of a variable (again: maximum block size is a good example) can also be done by a small team or a single developer. So if some economic nodes, e.g. a big group of service providers or a cartel of mining pools, want to change some parameter they could simply do it. For more complex changes, like the introduction of Segwit, you are correct that they would need cooperation with the Core team or have expenses to pay an own team. It would become dangerous if this group has malicious intentions and is big enough - i.e. comprises both big mining pools and service providers.

However what I meant was that in situations like 2017 normally competing development teams work on their own "vision", and if they can't come to a consensus regarding the protocol, then their different implementations can be incompatible one with another. And here is where the services nodes come into play: they can decide which implementation they use. They don't have to pay a (Bitcoin) dev team.

In general I think user apathy is a bigger problem than minor changes in the decentralization grade or power structure. But obviously you can't require all Bitcoin users to be involved with "protocol politics". So while there are influential users advocating for the basic Bitcoin properties (censorship resistance, immutability, supply etc.) and at least a big minority of the user base has some basic conceptions about these "Bitcoin values", then I'd say everything is fine because a significant enough number of users will follow these "influencers" and boycott possible malicious changes.

[franky1]

Not necessarily. A simple change in the core software, like a change of a variable (again: maximum block size is a good example)

unlike a simple variable 2009-2015 of maxblocksize
the way core code is now wrote, to do with the blocksize(weight). they have re-wrote the code into cludge where it requires many parts of the code to change to take full effect, as it would bug-out if one variable was changed. and i think this was intentional as its too sloppy to be useful or the proper way to code things

so it would require more then a scriptkiddy to edit core to offer a blocksize change

as for implementing it. a mining pool group cant just change the rules without the economic boards agreeing and accepting it.
where as economic group with dev support could mandate it as mining pools cant spend rewards if economic nodes cant see funds

so this is where i also laugh when many people cry/blame mining pools. when its actually not much in the power of mining pools and is more economically politically in the power of the dev/economic nodes

and we all know if a group of economic nodes want ed to hire a separate dev team that wants to go against the core roadmap. it would get REKT by those that treat core as a religion of immortal gods

[Abiky]

Yeah I think hes just confusing everyone. Gensler's talking about exchanges holding a ton of Bitcoin which messes with the whole decentralization vibe. People dumping their BTC on exchanges is a problem. Remember not your keys not your coins! Keep that crypto safe in your own wallet, not on some exchange

People prefer convenience, so they will trust a centralized exchange even if that means losing complete control of their coins. Most of them don't even know that safeguarding private keys and/or seeds is the best choice for securing their financial future. As long as people keep trusting centralized entities, Bitcoin won't be able to achieve its full potential.

At least, not all coins are held by third-parties. A small portion of Bitcoin held on DEXs and non-custodial wallets will help prevent centralized entities from taking over the entire system. Hopefully, BTC stays that way forever.

However, I used "at least for now" because, with time, the government might start clamping down on decentralised websites and apps, it is only a matter of time. I hope people can refer to my warning when the term comes.

The government will only be able to "clamp down" on decentralized apps if they're not as censorship-resistant as they claim to be. Around 90% of dApps aren't truly-decentralized and censorship-resistant. This makes it easy enough for mainstream governments to enforce the rule of law.

We can blame developers by focusing on making money (hype) instead of what matters most. One would hope Bitcoin stays decentralized no matter what. The future can't be predicted, so lets hope for the best.

[Wind_FURY]

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.

But what's the thrshold/the percentage of total circulating supply to be held by one entity, or a cartel of centralized entities working together, before we can truly say that Bitcoin has centralized towards said entities and has failed?

I have been asking that question, not because I was trying to find at what percentage is the threshold, but to know what others believe might the threshold might be. No one would give a direct opinion. Hahaha.

ask your mentor.. he is the one not wanting normal people spending on the bitcoin network and instead locking coin up to use other systems requiring middlemen handing the payments in some other system

 

How about your mentor? I want to ask him. He literally SOLD all of his Bitcoins and said, or spread FUD, that Bitcoin would fail. Read the propaganda, https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-dabb30201f7

SOLD literally at the price below $500, because he truly believed Bitcoin would fail. Why? Because the Core Developers maintained the block size? It's preventing the network from scaling in, no?

Eight years after that blog, has it failed? It's still chugging along producing block after block, ser. It has not failed.

[icalical]

Well, he is not wrong, but not that right either. Bitcoin is made to be decentralized, that's why some centralized exchanges are able to hold many bitcoins, there is no central entity that can limit or prevent that. And if we talk about Bitcoin vision or development, it's not really decided by Bitcoin holders, it will be decided mostly by miners who can vote for Bitcoin Improvement Proposals, so owning a lot of BTC not really affecting how Bitcoin developing. And we talk about the Bitcoin market, it might be true the market can be easily crashed by those big whale, but if the demand and community is strong every-time those whale drop some big amount of BTC it will be bought by other people and market will be recovered.

My point is that, currently Bitcoin is the most popular decentralized Crypto we can find, so saying Bitcoin is not that decentralized is kinda misleading. I mean, how more decentralized Bitcoin needs to be if other crypto cant even get close to Bitcoin decentralization.

[wiss19]

Lol, it's amusing to read what some of these people think about Bitcoin, and what's more amusing is they make public statements that don't make much sense without even knowing much about it. He doesn't even know how the decentralization of Bitcoin works because decentralization doesn't depend on how the amount of coins is spread among different people but it's about the fact that it isn't controlled by anyone and the whole network is running on its own where miners are helping it run for the rewards they get.

Just because companies and investors hold a large quantity of Bitcoin, it doesn't mean they own the network have a share in it, or get to govern it. They have Bitcoins because it's valuable and they know they will get a lot of money when they sell their holdings.

[Negotiation]

Gary Gensler's statement about decentralized bitcoin seems largely unknown because the number of investors in bitcoin is huge. The episode focused on Gensler and the SEC's approach to the cryptocurrency sector, which has been subject to controversy and scrutiny. The warnings issued by Gensler about the risks associated with cryptocurrency investments were met with skepticism by the community, as was his subsequent endorsement of spot bitcoin ETFs, which some interpreted as an inconsistent position. This statement will have no effect on bitcoin. Investors earn profits by holding bitcoin.

[Wind_FURY]

Well, he is not wrong, but not that right either. Bitcoin is made to be decentralized, that's why some centralized exchanges are able to hold many bitcoins, there is no central entity that can limit or prevent that. And if we talk about Bitcoin vision or development, it's not really decided by Bitcoin holders, it will be decided mostly by miners who can vote for Bitcoin Improvement Proposals, so owning a lot of BTC not really affecting how Bitcoin developing. And we talk about the Bitcoin market, it might be true the market can be easily crashed by those big whale, but if the demand and community is strong every-time those whale drop some big amount of BTC it will be bought by other people and market will be recovered.

My point is that, currently Bitcoin is the most popular decentralized Crypto we can find, so saying Bitcoin is not that decentralized is kinda misleading. I mean, how more decentralized Bitcoin needs to be if other crypto cant even get close to Bitcoin decentralization.

Ser, study the Scaling Debate, and The Long Road To Segwit, https://bitcoinmagazine.com/technical/the-long-road-to-segwit-how-bitcoins-biggest-protocol-upgrade-became-reality

If the miners truly controlled the network, we would be under Jihan Wu's direction, and Bitcoin would have been forked away from under the stewardship of the Core Developers.

Plus Bitcoin may be debated to be centralized in some regard, but the network itself is decentralized.

[franky1]

How about your mentor?

i have no mentor and thats what you are jealous of, my ability to say whats on my mind, freely. i do not need to ass-kiss

and thats what makes me think you need to learn bitcoin as it is now, in reality, not how your mentor describes it to you.. , because you, several years later still have a mentor and recite him daily, even his insults, even his pigeon hole games

you are now even copying and reciting the ill-minded stupidity that if someone is not in religious cult A they must be religious cult B
thus you are trying to put me into a group i was not part of (though your mentor told you differently)

how about realise you dont need to be in a cult at all, escape your cult and start having independence
learn what independence is, then you will start to see where things are not as decentralised, and then able to actually try to scrutinise and highlight the central points of failures instead of just being told buzzwords of years ago, told to close your eyes and dont look, while being pampered back to sleep to not notice the traps that are forming

[mv1986]

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.

That is one of the issues and the other issue, which I think is at least something that Gary Gensler understands by saying "... not that decentralized..." is that decentralization is a spectrum. It would be interesting to have some decentralization index and then compare Bitcoin as an asset to other assets, but also as a system to other systems. Because on the one hand he understands that it is a spectrum, but on the other hand his goal was to insinuate that those who call Bitcoin decentralized are on the wrong path.

He also forgets that decisions by powerful actors against the Bitcoin system will cost the powerful actors a lot of money, in a worst case everything they invested to gain that power. In the banking system, this is 100% not the case. There is no skin in the game. The too-big-too-fail problem does only exist because the most powerful centralized institutions or actors (governments) will just decide to bail them out. Hence: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." There is no such bailout for powerful actors in the Bitcoin system if they decide to act against it. It will be game over and the skin they had in the game will be burned to ashes.

There is some impressive interplay between decentralization and skin in the game, which I think Satoshi has solved in a way that is worth a Nobel Prize. I have often been researching and thinking about loopholes, but I always end up concluding that it would be prohibitively expensive for any actor to gain power and then destroy the network for many, many reasons. Financial reasons, geopolitical reasons, opportunistic reasons, any strategic reasons, and gaining power in order to then destroy it is probably something that doesn't really sound like something worth striving for. 

[goldkingcoiner]

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.

Suddenly, Gary Genser knows all about how Bitcoin works? I highly doubt that.

This is nothing but pure misinformation from one of Bitcoins enemies. He wants to see Bitcoin gone and his rich banker friends made even richer. I have no idea why you are jumping on this propaganda train. You, Abiky, are not a newbie, you should know better by now. Shame on you for spreading obvious FUD.

It does not matter how much Bitcoin CEXes have. And it never did matter. The only case in which it would make a difference is if Bitcoin was POS, which it is not.

ETF's are fake Bitcoin. The worst that these CEXes can do is manipulate the price of Bitcoin by selling/buying.

[ivankoh]

What does Gensler mean by stating “bitcoin is not decentralized”? Well, I think this is interesting in a literal sense, for institutional investors, large corporations, ETFs it is not widely approved. Widely at the international level, the lack of uniform adoption after licensing approval will almost certainly favor the earliest Bitcoin spot ETFs, which favor the corporations that he knows the most about. Who benefits? Yes, in another sense… it means a collection of ETFs that will cooperate with each other in some special form in the future. Lol, Or this is a knife that market makers can use to take down competitors and increase their position.

[legiteum]

[...]
ETF's are fake Bitcoin. The worst that these CEXes can do is manipulate the price of Bitcoin by selling/buying.

I think you touch upon the heart of the debate here by calling ETFs (and I would presume their close cousins, Bitcoin purchased through brokers like Binance and CoinBase), "fake".

It's fine if you want to call somebody who doesn't physically hold their private key, "fake" and in a way I agree with you, but Gensler is only looking at the current practical reality of the situation, which is that most of the retail investors in the USA--the ones he's supposed to protect from fraud---are these "fake" Bitcoin holders.

And if all of those "fake" holders left the market, Bitcoin would probably drop in price by about 95%.

For most average holders of a Bitcoin investment today, their holding is kept in a centralized Oracle database (or whatever) and the "decentralized" aspect of Bitcoin itself means absolutely nothing to them.

So it's absolutely correct for Gensler to treat Bitcoin just like any other investment instrument the public can buy, like stocks or derivatives or ETFs or anything else. They all work exactly the same way, as far as your average consumer is concerned.

[vapourminer]

Suddenly, Gary Genser knows all about how Bitcoin works? I highly doubt that.

Genser taught a course at MIT entitled Blockchain and Money in 2018

so hes not unfamiliar with it

see
https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/

This course is for students wishing to explore blockchain technology’s potential use—by entrepreneurs and incumbents—to change the world of money and finance. The course begins with a review of Bitcoin and an understanding of the commercial, technical, and public policy fundamentals of blockchain technology, distributed ledgers, and smart contracts. The class then continues on to current and potential blockchain applications in the financial sector.

[goldkingcoiner]

Suddenly, Gary Genser knows all about how Bitcoin works? I highly doubt that.

Genser taught a course at MIT entitled Blockchain and Money in 2018

so hes not unfamiliar with it

see
https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/

This course is for students wishing to explore blockchain technology’s potential use—by entrepreneurs and incumbents—to change the world of money and finance. The course begins with a review of Bitcoin and an understanding of the commercial, technical, and public policy fundamentals of blockchain technology, distributed ledgers, and smart contracts. The class then continues on to current and potential blockchain applications in the financial sector.

Interesting. All that knowledge and yet he did not have the foresight to invest into Bitcoin in 2018....

You would think he is getting paid big bucks to throw dirt on Bitcoin.

Either way, I am still not impressed.

[...]
ETF's are fake Bitcoin. The worst that these CEXes can do is manipulate the price of Bitcoin by selling/buying.

I think you touch upon the heart of the debate here by calling ETFs (and I would presume their close cousins, Bitcoin purchased through brokers like Binance and CoinBase), "fake".

It's fine if you want to call somebody who doesn't physically hold their private key, "fake" and in a way I agree with you, but Gensler is only looking at the current practical reality of the situation, which is that most of the retail investors in the USA--the ones he's supposed to protect from fraud---are these "fake" Bitcoin holders.

And if all of those "fake" holders left the market, Bitcoin would probably drop in price by about 95%.

For most average holders of a Bitcoin investment today, their holding is kept in a centralized Oracle database (or whatever) and the "decentralized" aspect of Bitcoin itself means absolutely nothing to them.

So it's absolutely correct for Gensler to treat Bitcoin just like any other investment instrument the public can buy, like stocks or derivatives or ETFs or anything else. They all work exactly the same way, as far as your average consumer is concerned.

Effectively, people are trading dollars in for a digital piece of paper that says you own x amount of Bitcoin and the only positive side is that they do not have to worry about losing any private keys because someone else is buying and hodling the real Bitcoin for them. The good thing for Bitcoiners is that this creates an increased demand for the buying of actual Bitcoin. But that's as far as it goes when it comes to the question of how much influence do ETFs have over Bitcoin.

And just like with CEXs buying up huge amounts of Bitcoin, all the ETFs do is speed up the demand and adoption of Bitcoin. Something which would happen without them anyway. Just much slower.