Could this be a flaw of decentralisation?

[Mia Chloe]

As bitcoin enthusiasts we all like the concept of both privacy and Decentralisation and even in addition to that the bitcoin network also packs transparency via a Blockchain network that is easily accessible to anyone with internet of course. Anyways, decentralisation comes with a very nice advantage of having no central body in charge of controlling the network . What about making decisions? Would that be a yes?

Well firstly in this context I'm not referring to bitcoin developers as decision makers rather more of whales and big firms. The concept of decentralisation kind of suggests that everyone has a relatively equal right or rather power in the network more like the concept of egalitarianism and democracy.

Now I'm not talking about politics here so let me cite an example to make the picture clearer. The bitcoin network has a supply cap of 21 million coins and as of, today excluding Satoshi's mined coins we have roughly 18 million coins in circulation. Now this constitutes the hodlings of both individual retail holders like you and I as well as WHALES and bigger Firms like BLACK ROCK.

If power is relatively shared based on decentralisation, then these whales and big firms have a bigger edge on the block chain in price influence than retail holders since they Hodl more coins (POWER). We've seen many times where prices move either up or down drastically when big firms either buy or sell huge amounts of bitcoin. So could it be seen as a flaw in decentralisation? Remember nothing is 100% flawless!!

[aoluain]

Decentralisation has nothing to do with Bitcoins open market and the price at which it is bought and sold.
Decentralisation has everything to do with the concept that no single entity controls the network/Blockchain
and anybody and everyone is free to use it. Decisions on the Blockchains future i.e changes to the network
are made between the developers, miners, node runners and me . . .and you.

Nobody has the power to stop all the millionaires in the world from buying Bitcoin, and they dont have the
power to take it off us! they have to buy it just like us.

The market moves on speculation by me and you not by a flaw in decentralisation.

[BIT-BENDER]

To be brief you need to see decentralisation as an entity against a centralised body. There is no Central body that can boast to have the full decision making in crypto-currency. Yes a group of bug whales who owns a very Huge chuck of Bitcoin can or may affect the price if the sell or buy but this whales aren't a central body. And even if they can affect they price it can't be for long term. And if you aren't moved by FOMO or FUD then you should not be too bothered.

[Felicity_Tide]

Let me start by asking, is decentralization tied to network or the market?.

I think there is a contradiction here between the Bitcoin network and the whole market thing. Just as you've said, decentralization makes sure no central authority is in control, and I believe that is strongly related to the Bitcoin network itself, and doesn't really enforce same to the market.

Of course, I agree that there are some organizations or people that tend to have more of the Bitcoin than others, but that doesn't mean that there is a flaw in the technology or the network itself. It's just some random economical principles where those with more money or resource can purchase more than the other.

Okay fine, Mia Chloe has 30 million Bitcoin which makes him the highest holder, but that doesn't give Mia Chloe the authority to assign working days of the Bitcoin network. It doesn't give Mia Chloe the authority to create more Bitcoin without the consultation of the community.(just an example)

So, I don't think this could be a flaw in decentralization. We can maybe say that there will surely be some price manipulation if any of this major holder, like the popular we know of(don't really need to mention the name), decides to sell and buy back.

[Zaguru12]

If power is relatively shared based on decentralisation, then these whales and big firms have a bigger edge on the block chain in price influence than retail holders since they Hodl more coins (POWER). We've seen many times where prices move either up or down drastically when big firms either buy or sell huge amounts of bitcoin. So could it be seen as a flaw in decentralisation? Remember nothing is 100% flawless!!

Reacting to this last piece here, so your notion is actually if whales can buy and the price pumps up it defeats decentralization but that is not the decentralization issue we are here for, a Bitcoin decentralization is where you can decide today to be a whale your self by simply buying millions of bitcoin with restrictions as a in centralized networks, decentralization is when you can send your bitcoin to any address of your choice, without transaction been censored,

The only thing the whales have is simply more bitcoin which it’s effects is felt base on simple demand and supply, should they sell alot it cause panic but that doesn’t enforce your own sell, should they buy it causes FOMO but still that doesn’t enforces anything. Whales can only temper with decentralization if there large junk of bitcoin make them decision makers when it comes network forks or things like that

[Ambatman]

Bitcoin design is decentralized because there's no central entity or Third party that can control the Network.
Decentralization doesn't mean or guarantee equal distribution of wealth
It's a common feature in many decentralized and even traditional system.
Bitcoin price volatility is because it's relatively still young and not because there's a flaw in decentralization.
As long as they don't have influence over the rules and protocols of the Blockchain because of the quantity of Bitcoin they have
There's no flaw in decentralization as a result of Quantity imbalance.

[Zlantann]

The only thing the whales have is simply more bitcoin which it’s effects is felt base on simple demand and supply, should they sell alot it cause panic but that doesn’t enforce your own sell, should they buy it causes FOMO but still that doesn’t enforces anything. Whales can only temper with decentralization if there large junk of bitcoin make them decision makers when it comes network forks or things like that

When most of us are celebrating the price rise that was triggered by the approval of spot Bitcoin ETF. I observed that some members in this forum warned about the negative effects of this move. There is nothing anybody can do because the market is free, people can buy and sell without restrictions. But as the amount of Bitcoin institutional these investors are controlling keeps increasing, they might have some level of influence over the market. Bitcoin might never be centralized but if these whales keep acquiring more coins we might end up having a partially controlled market where they can cause FOMO at will.

[Jawhead999]

Yeah the flaw of decentralization is the decentralization itself.

Even though technically Bitcoin's network is decentralized and no one control it, but what's the point of having decentralized network when almost all coins are belong to centralization? it depends on their hands to move the coins, while we and the miners only wishing them to move the coins (if we're in that situation in the future).

And even if they can affect they price it can't be for long term.

If they continue to hold and never sell their coins, they will affect the price for long term.

[Frankolala]

You are in charge of your bitcoin and your own bank, you don't need a third party as a central point for your transaction to be carried out. The network is controlled by everyone because it's an open source. Because bitcoin is for all makes it difficult for anyone to manipulate the price for long. Decentralization is not dead even if whales have most bitcoin with them because you holding your bitcoin in your private wallet is still in control of your bitcoin and can do whatever you like with your bitcoin.

[cabron]

You are in charge of your bitcoin and your own bank, you don't need a third party as a central point for your transaction to be carried out. The network is controlled by everyone because it's an open source. Because bitcoin is for all makes it difficult for anyone to manipulate the price for long. Decentralization is not dead even if whales have most bitcoin with them because you holding your bitcoin in your private wallet is still in control of your bitcoin and can do whatever you like with your bitcoin.

When governments of every country worldwide work together to ensure that exchanges comply with policies, they become the central power that compromises decentralization where they can freeze and block the trades and transactions of someone. The government can tell the exchanges to delist coins and tokens or block the funds sent from addresses. More flaws when the developers have a public profile.

The only decentralization left is nothing can stop someone from releasing altcoins.

[mindrust]

Decentralized means transactions cannot get censored.  At least that’s how I understand it. If somebody happens to own 5 million bitcoins, that has no effect on its decentralization. It is just somebody owns lots of coins. Make it 20 million btc and still nothing will change. Dev decisions are kind of centralized but that’s to be expected because in the end btc is human made. It didn’t occur naturally or written by the AI. (Some say satoshi was AI but I have no idea about it) So somebody has to come up with the new ideas and implement them. The network itself is decentralized.

[uneng]

Yes, you are right. Decentralization doesn't ensure equal distribution of coins and equal influence among every adopters. Whales will always have a deeper influence on this market and will consequently be able to manipulate in which directions we are going to head.

However, this issue could be solved if always a whale or a group of them tried to manipulate the market, average investors immediately bought the coins being dropped for sale in the market. That is how crypto enthusiasts decrease the impact of whales on long term.

I believe we did some progress since the beginning, but the institutional investors are a big concern on this matter yet.

[Stablexcoin]

Decentralization in Bitcoin has to do with the protocol. There is consensus that the original protocol surrounding Bitcoin cannot cloned accurately where as no single entity can boast that they have full authority over the network.

There can be influence from several factors most especially, political influence but that does not mean there is one single control over Bitcoin. The act of decentralization in Bitcoin has no flaws. I am certain of that.

[headingnorth]

Why would whales being able to buy and sell bitcoin be a flaw of the network? If you excluded the whales from participating then THAT would be a serious flaw.
The strength of bitcoin is that ANYONE can buy and sell it. That is the very definition of decentralization. It is a strength of bitcoin's decentralization not a flaw or weakness.

If you started excluding certain groups of users such as millionaires or billionaires, then it could no longer be called decentralized and the network would collapse overnight.

[Mia Chloe]

It wouldn't be easy replying to everyone here by quoting according to how I'm supposed to that's if I'm not going to pyramid quote which is something I don't like doing. Now everyone here have made some really nice suggestions and some seem to understand and disagree with my point and some others seem to agree. I'm not directly associating decentralisation with the idea that everyone has to have equal power which is impossible even without the concept of Decentralisation.

The point here is relatively distribution of power can still be used to alter significant things like price and adoption. The more whales buy bitcoins from retailers  and small HODLers the fewer the number of persons sharing the power of decentralisation in this context.

Okay fine, Mia Chloe has 30 million Bitcoin which makes him the highest holder, but that doesn't give Mia Chloe the authority to assign working days of the Bitcoin network. It doesn't give Mia Chloe the authority to create more Bitcoin without the consultation of the community.(just an example).

I think you made a typo error here because no one can own 30 million coins since it's more than the market cap.

[albertorma]

This has never been about money - It has always been about solving a real problem! Of course, as a side effect, solving that problem makes Bitcoin the best form of money to ever exist.

Bitcoin is absolutely decentralized. As stated in the whitepaper, it prevents electronic coin double-spend attacks using a mechanism inspired by hashcash. This principle remains valid today and has nothing to do with the perfectly legitimate right of organizations to use it. Similarly, organizations holding gold and creating gold-backed assets don’t diminish gold’s intrinsic value.

While I understand the concern about greedy organizations potentially trying to take control of Bitcoin, do we actually see this happening? For Bitcoin to maintain its value, it must remain useful. Any violation of its principles would spark an instant revolution; the response from the cypherpunks who have dedicated their lives to this technology would be overwhelming, and the market would adjust accordingly, supporting the rightful version of Bitcoin / Bitcoin ideas.

Ideas cannot be destroyed, only improved. In my view, Bitcoin has grown too big to fail. I will support any project that adheres to its profound fundamentals, with Bitcoin "Core" being the most likely to fulfill this vision.

[Hatchy]

The point here is relatively distribution of power can still be used to alter significant things like price and adoption. The more whales buy bitcoins from retailers  and small HODLers the fewer the number of persons sharing the power of decentralisation in this context.

I believe the decentralization of Bitcoin remains unaffected. By definition, decentralization means that Bitcoin cannot be controlled by a single central authority. This implies that large institutions or entities have no say in how Bitcoin operates, including its blockchain and technical aspects.

While their actions significantly influence prices, as we're well aware, this is a normal phenomenon in economic markets. These large players cause price fluctuations, which can impact the market's significance. However, they buy and sell Bitcoin just the exact same way, we individual or small scale investors do through the market making us even

The only distinction between institutional investors and individual investors is the scale of their transactions. Institutional investors buy in bulk, potentially generating more profits as prices reach new levels.

Generally, prices are influenced by human activities, which is a natural aspect of any market. Therefore, there's no reason to fear that price fluctuations caused by big bodies will compromise Bitcoin's decentralization.

[Felicity_Tide]

I'm not directly associating decentralisation with the idea that everyone has to have equal power which is impossible even without the concept of Decentralisation.

The point here is relatively distribution of power can still be used to alter significant things like price and adoption. The more whales buy bitcoins from retailers  and small HODLers the fewer the number of persons sharing the power of decentralisation in this context.

I understand what you are trying to pass across, and I believe others do, but my question still remains, is decentralization of Bitcoin tied to the network or the market?.

I definitely agree that more whales buying larger portion of the total Bitcoin can give them edge over others in terms of price manipulation, but that doesn't still put them in charge if we're to stick with what decentralization still means. Besides I don't think every whale plans on holding their Bitcoin forever. Some will definitely sell at some point thereby releasing it back to the market for others to buy.

Or maybe I still can't see from the angle you're coming.

Okay fine, Mia Chloe has 30 million Bitcoin which makes him the highest holder, but that doesn't give Mia Chloe the authority to assign working days of the Bitcoin network. It doesn't give Mia Chloe the authority to create more Bitcoin without the consultation of the community.(just an example).

I think you made a typo error here because no one can own 30 million coins since it's more than the market cap.

My bad, I meant to say 3 million.

[franky1]

decentralisation is more about whom controls the rules of the network, and yes there is a controller(core)

but if you only want to talk about the market price manipulation. it can be solved, by not giving 3 main exchanges the popularity of centralising so much coin that the whales can then control the price.
it becomes harder to arbitrage and manipulate the price if there were more exchanges, and if those exchanges didnt allow instant transfers of reserves, (for the whales to set prices on one exchange to instantly impact and thus control the other exchanges)

thus achilles heel of whale manipulation is the centralised exchanges

..

right now we are seeing a great example of whale manipulation which released their walls of the $75k resistance at start of month, and now are using a newly implemented wall at ~$93k~$95k which they are using to stop the price naturally growing beyond the $100k price. as the whales dont want the 2025 ATH of above $100k to happen too soon

however there are actually 2 main groups of whales, those that released the $75k wall to allow the price to naturally grow because they want to start raising the price naturally to get profit sooner. vs another group that dont want the price to fully set a major ATH before 2025 because they dont want to claim major taxable profits for the december end of year tax deadline

[d5000]

If power is relatively shared based on decentralisation, then these whales and big firms have a bigger edge on the block chain in price influence than retail holders since they Hodl more coins (POWER).

I think in general you are correct that an excessively unequal Bitcoin distribution may lead to problems. However, as of 2024 this is more a danger "looming in the background" than a real problem. [1]

"Traditional" Price manipulation is not the main problem I'm seeing. Instead, if a new conflict about a development decision, like the one about Segwit/big blocks in 2017 happens, then whales could indeed try to position themselves in this conflict. This doesn't apply so much to ETF firms like BlackRock, because they are mere intermediaries of their customers. Independent holders like MicroStrategy, or nation-state whales (imagine the US buying a million coins) are more dangerous in this regard.

Imagine the following scenario:

- Developers plan a privacy coin function (let's say something like MimbleWimble introduced by LTC)
- The US government (if it holds large amounts of coins), Microstrategy, or whoever opposes this plan, buys trolls on X and Bitcointalk to support the position and tries to fabricate a debate about the "harms" of the privacy feature.
- An "independent developer" appears and creates a Bitcoin version without the privacy function, which would hard fork at a specific block (same as Bitcoin Unlimited in 2017)
- The whales say that they will support the branch without the privacy feature. This leads to fears that they could sell the Bitcoins on the chain with the privacy feature, and in consequence, the privacy feature loses support.

This is also the reason why I don't like the idea of governments buying too many Bitcoins. It would not do harm if they hold some as a strategic reserve, but they should never have excessive power. Nobody can stop them however, so it's the community who has to fight against that scenario.

The solution is actually that the community must uphold cypherpunk values also in the future (see @albertorma's post), to counter all these possible attacks by whales. Bitcoin is also a kind of social network, not only a technological solution; we shouldn't forget that, so the community does have some power too, not only the whales. It's the community who builds the "story" Bitcoin's success is based upon. And it must stay crystal clear that censorship resistance is one of Bitcoin's main features and never a development decision should be taken that harms this.


[1] In the case of Bitcoin, at least; many altcoins instead have indeed problematic levels of power concentrations, often in the hands of the "developer" team.