If Bitcoin was centralized, would the price of BTC go down or up?

[legiteum]

So here's a thought experiment for you all.

Imagine that the Bitcoin core codebase was changed to an architecture that accomplished two things:

1. Made it so that Bitcoin could truly handle, natively, every single daily transaction on the planet for essentially zero transaction cost and millisecond-level clearing time, making it so that Bitcoin could truly replace all financial transactions, even the tiniest ones, and it would do it at a lower cost and higher speed than credit cards.

2. Mostly killed the idea of "decentralization" for Bitcoin because the new architecture would be controlled by a single entity or a small cooperative of closely coordinated entities that would maintain nodes tightly together, killed PoW, etc. etc.

The question is, upon hearing this news, how would the Bitcoin market react?

Here's some of my guesses:

Negative reaction: "OMFG they are ruining the original idea behind Bitcoin! I'm selling all of my sats!".

Positive reaction: "Wow, BTC is going to absolutely MOON since adoption will go crazy now that we can use Bitcoin everywhere, I'm buying every sat I can to get on this rocket ship!"

Faux negative reaction: "This is horrible and terrible and insults my religion! [while I am going to quietly buy as much BTC as I can because I know this will moon the price]".

Post after post here on Bitcointalk these days seems to have a recurring theme: the original Bitcoin religion is dying or dead, and now it's all about making the price of BTC go up and nothing else matters. Almost all users of Bitcoin today do so in a centralized way, so the architecture behind their investment is meaningless to them--so they would be in favor of anything that would make the price go up.

Other competing products like SOL, ETH, XRP, and so on have moved to less-decentralized architectures and they are bigger than ever. You could make the case that Bitcoin will become "the MySpace of digital currency" if it doesn't evolve to the new realities of the market. On the flip side, you could also argue that Bitcoin could wipe all of these competitors out in a one day just by changing the technical architecture.

My own guess is that Bitcoin would MOON if they announced this, but that's just my guess. I would love to hear what others think of this.

[Dunamisx]

There's a condition to your question which is if, this is a probability in which they cannot be certainty to, if I am to give you an answer directly to what I see, then know that bitcoin can never turned a zero value, as long as the protocol and everything remain in consensus, also we should not think of seeing it being centralized because it is already made by default in the centralized digital currency.

[Richbased]

If bitcoin was to be centralized, many people won't invest in it because it will still be same issues with centralized crypto projects. It will face a lot of manipulation by the government and they can trap people by pumping the price and after many people has invested they can dump the market and many people will suffer severe losses and the price won't rise again. The reason why bitcoin exist till now is because of its decentralized nature. Forget about ETH, XRP and SOL because even though that some of those cryptocurrency has a strong network but they are likely to disappear in the future.

I don't know what you meant by saying that most bitcoin investors use centralized means but you should know that as much as many people are trading bitcoin on CEX, there are also many investors who are strong hodlers and they still have their bitcoins in self-custody wallets.

Never think that bitcoin will reach the moon if it becomes centralized because even the government do not want you to be rich so they will never allow the price to reach zenith.

[Cryptomultiplier]

As a thought, potential investors could see holding Bitcoin as a waste of time because the digital gold value has become more like a centralized database like the digital dollar or even the CBDC.
This would make assets easily seized or blacklisted and could even make Bitcoin lose current adopters who already believe in the decentralized nature of Bitcoin and own investments in it.

The market has always leaned towards the slower more decentralized version of money because of the accumulated value it holds as immutable, rather than what the centralized version which holds cheap transactions value holds for them.
There was a similar case of this instance during the block size war in 2017 when Bitcoin vs Bitcoin cash competed for dominance.

[legiteum]

If bitcoin was to be centralized, many people won't invest in it because it will still be same issues with centralized crypto projects.

Most other cryptos are much more centralized than Bitcoin and collectively they have about 45% of the market cap of Bitcoin. That proves that most investors don't care about centralization imho.

It will face a lot of manipulation by the government and they can trap people by pumping the price and after many people has invested they can dump the market and many people will suffer severe losses and the price won't rise again.

Again, this hasn't happened with those other cryptos, so why should it happen to Bitcoin?

And since most BTC investors already use a broker or an app or an ETF, this theoretical issue is already come to pass and the market doesn't seem to care.

The reason why bitcoin exist till now is because of its decentralized nature. Forget about ETH, XRP and SOL because even though that some of those cryptocurrency has a strong network but they are likely to disappear in the future.

They have hundreds of billions in market cap, hundreds of millions of users, and are growing every day. Are you sure they are just going to disappear one day? Why?

As a thought, potential investors could see holding Bitcoin as a waste of time because the digital gold value has become more like a centralized database like the digital dollar or even the CBDC.

Why would that make any difference. Bitcoin would still be Bitcoin, limited to 21M blocks, etc., it would just work differently behind the scenes.

This would make assets easily seized or blacklisted and could even make Bitcoin lose current adopters who already believe in the decentralized nature of Bitcoin and own investments in it.

Again, if you use a broker or an app like most investors of BTC do, or especially the ETF, then that same risk applies--and nobody seems to care...

The market has always leaned towards the slower more decentralized version of money because of the accumulated value it holds as immutable, rather than what the centralized version which holds cheap transactions value holds for them.

Something can be immutable and also be centralized and fast. You don't need PoW to be immutable.

[stwenhao]

how would the Bitcoin market react?

Try signet, and see, how much it is worth: https://altquick.com/exchange/market/BitcoinSignet

Also, if you wonder, how Bitcoin would behave, if this or that would be changed, then there are a lot of altcoins, which can show you exactly that.

Post after post here on Bitcointalk these days seems to have a recurring theme: the original Bitcoin religion is dying or dead, and now it's all about making the price of BTC go up and nothing else matters.

If nothing else would matter, then Bitcoin wouldn't be created in the first place. It was born just after 2008 crisis, and you can literally see in the first input ever created, why it was made. In general: if fiats would be better, then Bitcoin would never be needed. And as long as centralized currencies are stable for a long time, and then they crash hard, by making a lot of people poor, Bitcoin will be needed.

My own guess is that Bitcoin would MOON if they announced this, but that's just my guess. I would love to hear what others think of this.

There is one problem with that way of thinking: similar solutions are known for years. There is nothing new, if you want to make yet another centralized mint:

https://en.bitcoin.it/wiki/Bitcoin_is_not_ruled_by_miners#Efficiency

If you are OK with 10 or so individuals controlling the currency, then you can design a much better system than Bitcoin. For example, you can design a system using chaumean e-cash with the following properties:

• 20 independent entities are designated as signers.
• As long as a majority of signers are honest, the system remains secure.
• The system has perfect anonymity. The signers cannot know anything about the flow of money.
• Transactions are instant, requiring only communication with the signers and a small amount of computation.

If you want to preserve the mining mechanism, you can create a simple proof-of-work block chain which simply determines the current signers and creates coins. Users of the system would look at the most recent blocks only to determine the public keys and IP addresses of the current signers, and then use the system as previously described.

This system would be better than Bitcoin in several ways. But the point of Bitcoin is to be decentralized, so Satoshi rejected this idea (which has been well-known for over 20 years) and created Bitcoin instead.

And when it comes to other altcoins, how do you know, that some "chancellor" would never do a "second bailout for banks", but this time on these altcoins? If you wonder, why so many people are using altcoins, just to get more BTCs, then now you should know the answer. Many altcoins are doing well, mainly because a lot of people use them as a way to get BTCs, or they wrap their BTCs into them, use them, and then earn BTCs from them. If not that, then they could be worth much less, because similar solutions existed long before Bitcoin, and you can see, how they ended, when they were not connected with any BTCs, to get some value from there.

[Ambatman]

A good perspective
I have thought about this when I reasoned how most are more concerned about price than Bitcoin.
Well it would turn bitcoin to other altcoins
Expect pump and dump manipulation (worse than this).
Bitcoin would crash
And the price would be lower than you think.
It may seem like people don't care about decentralisation
But subconsciously they trust if and believe it's would moon because of that and supply.

[KingsDen]

A good perspective
I have thought about this when I reasoned how most are more concerned about price than Bitcoin.
Well it would turn bitcoin to other altcoins
Expect pump and dump manipulation (worse than this).
Bitcoin would crash
And the price would be lower than you think.
It may seem like people don't care about decentralisation
But subconsciously they trust if and believe it's would moon because of that and supply.

I feel that the decentralization of bitcoin takes more effects in the security of the network and not in volatility. Bitcoin can be centralized and still the price will go positive or negative.

That being said, bitcoin volatility is determined by the demand and supply factor and then sealed by the scarcity model. So, there will still be movement of bitcoin price even if it's centralized. The problem and the doubt will come in a a critical point - ensuring that 21 million BTC cap supply is not altered behind the scene. This is the point that the decentralization is influencing the price.

[EL MOHA]

I feel that the decentralization of bitcoin takes more effects in the security of the network and not in volatility. Bitcoin can be centralized and still the price will go positive or negative.

That being said, bitcoin volatility is determined by the demand and supply factor and then sealed by the scarcity model. So, there will still be movement of bitcoin price even if it's centralized. The problem and the doubt will come in a a critical point - ensuring that 21 million BTC cap supply is not altered behind the scene. This is the point that the decentralization is influencing the price.

I agree I think that if we are even taking about bitcoin price and volatility the case for decentralization shouldn’t be brought up. This is because decentralization is a network thing and not actually tied to price. Bitcoin price is dependent on the market demand or supply and not about how the network of bitcoin is. Decentralization should only come into discussion when the discussion is about nodes.

As for how the price will fair if the coin is actually centralized I think bitcoin will lose investors for sure, because some investors are after bitcoin not just of some of the other values it is adds like store of value but because it’s not controlled by any singular entity. So let’s say bitcoin is centralized today then I will say that the price will fall

[legiteum]

Also, if you wonder, how Bitcoin would behave, if this or that would be changed, then there are a lot of altcoins, which can show you exactly that.

Non-bitcoin cryptos, mostly concentrated among about four more coins, are about 45% of the total crypto market cap. They are smaller than Bitcoin, but that certainly shows that non-decentralized is not a deal breaker for investors.

If nothing else would matter, then Bitcoin wouldn't be created in the first place.

Digital currencies were illegal in 2008. They are legal today. Bitcoin needed to be created the way it was back then. Now this architecture is not necessary.

There are many, many examples of products that were designed a certain way, then the situation changed (and they didn't), and then they went obsolete. If investors don't care about decentralization, then Bitcoin should pay attention to that. Things like the ETFs are hard to ignore.

Expect pump and dump manipulation (worse than this).

Why would the backend architecture make any difference? Bitcoin is pumped/dumped all of the time by whales anyhow. Anything that is openly available on the market can be pumped/dumped.

That being said, bitcoin volatility is determined by the demand and supply factor and then sealed by the scarcity model. So, there will still be movement of bitcoin price even if it's centralized. The problem and the doubt will come in a a critical point - ensuring that 21 million BTC cap supply is not altered behind the scene. This is the point that the decentralization is influencing the price.

Exactly. The important promise is the 21M cap, not how the physical network works. And the 21M cap absolutely is centralized since it's basically up to a few dozen caretakers of the Bitcoin code base.

To the average investor, the only thing they would notice is that transactions are much faster and extremely cheap all of the sudden, leading them to believe that Bitcoin adoption could multiply. Everything else about Bitcoin would be exactly the same.

[Hamza2424]

Post after post here on Bitcointalk these days seems to have a recurring theme: the original Bitcoin religion is dying or dead, and now it's all about making the price of BTC go up and nothing else matters. Almost all users of Bitcoin today do so in a centralized way, so the architecture behind their investment is meaningless to them--so they would be in favor of anything that would make the price go up.

My own guess is that Bitcoin would MOON if they announced this, but that's just my guess. I would love to hear what others think of this.

Yep, you are right. A lot of people are using it in a centralized way by buying and selling on centralized platforms and giving their information like KYC, so that affects the real benefit of BTC. But if it becomes centralized, I am sure the negative impact would be bigger than the positive impact. That means a lot of people will start selling. Although stablecoins are what you are talking about, they have low fees and can be used for the tiniest transactions. Their fees are lower, but a fee is still a fee, and there are only a few conditions where we do not have to pay fees, like using specific platforms.

The point is, if I care about decentralization, which I do, I will sell. But I have BTC, and I care about my profit because I have dedicated some years to it, learning and accumulating, so I do not want to miss any chance if it goes to the moon. So I will sell more than 80% to save myself from a huge loss because I am 100% sure it is going to hit $4k or maybe lower if it becomes centralized.

And yes, I will buy again if it ever hits $4k.

[legiteum]

Although stablecoins are what you are talking about, they have low fees and can be used for the tiniest transactions. Their fees are lower, but a fee is still a fee, and there are only a few conditions where we do not have to pay fees, like using specific platforms.

Well, there are stablecoins out there with ZERO transaction fees and transactions in milliseconds.

The point is, if I care about decentralization, which I do, I will sell. But I have BTC, and I care about my profit because I have dedicated some years to it, learning and accumulating, so I do not want to miss any chance if it goes to the moon. So I will sell more than 80% to save myself from a huge loss because I am 100% sure it is going to hit $4k or maybe lower if it becomes centralized.

And yes, I will buy again if it ever hits $4k.

Certainly a lot of people feel this way, as I mentioned in my OP. But the question is whether people with your feelings have more money than the rest. I bet most of the $$$ would stay in BTC, and lots of new money would come in, but that's just a guess. The "big" money that truly moves the market, as well as the BTC whales, wouldn't move away.

For instance, would Michael Saylor dump all of his BTC if Bitcoin became more centralized? I seriously doubt it.

[Ambatman]

Why would the backend architecture make any difference? Bitcoin is pumped/dumped all of the time by whales anyhow. Anything that is openly available on the market can be pumped/dumped.

Hello
I said worse not that it doesn't already exist
The only time that it may seem to be bullish is if it becomes a legal tender
And once it is volatility would be killed
Because it would be harder to control a volatile currency.
And not to forget nothing stops them in making it like a cash printer.

[EFS]

Decentralization is one of Bitcoin's key features. Losing this wouldn't be a good thing. In that case, whoever controls the network gets their way. They can manipulate the price however they want. Why would we want to be part of a centralized system anyway? We already have fiat currencies for that. At that point, Bitcoin would lose its purpose. It would be no different than Ripple and similar altcoins.

[mcdouglasx]

The slowness of transactions is what gives Bitcoin its security and prevents many problems, so we shouldn't worry about making transactions faster on the main chain. It's not a bug; it's a fundamental feature. It's like gold: if we wanted to pay millions in gold, we would need time to transport it, and that has never been an impediment to its value. Making transactions instantaneous would mean collapsing the mining process with so many blocks per second, which would cause it to fail on its own, regardless of whether it's centralized or not. There are also sidechains for speed, and we can always return to Layer 1 if they become too centralized.

[HelliumZ]

If Bitcoin's creator Satoshi Nakamoto is identified or if he goes public, Bitcoin will become a central currency, then perhaps the Bitcoin we hope for in the future may not be possible in reality.
But if Bitcoin's creator Satoshi Nakamoto is not identified or if he does not go public, Bitcoin will never become a central currency. If Bitcoin does not become a central currency, Bitcoin will not reach zero value in the future. That is, Bitcoin will continue to increase over time if the original inventor of Bitcoin does not come forward.

[legiteum]

The slowness of transactions is what gives Bitcoin its security and prevents many problems, so we shouldn't worry about making transactions faster on the main chain. It's not a bug; it's a fundamental feature. It's like gold: if we wanted to pay millions in gold, we would need time to transport it, and that has never been an impediment to its value. Making transactions instantaneous would mean collapsing the mining process with so many blocks per second, which would cause it to fail on its own, regardless of whether it's centralized or not. There are also sidechains for speed, and we can always return to Layer 1 if they become too centralized.

Yes, the miners in this case would be screwed since they would no longer get all of those fees, but that's an advantage for end-users, investors and basically everybody who doesn't work for a miner. So maybe all of the people who work for miners will dump their BTC in protest (or maybe they won't since they'll want to be around for BTC to moon), but millions more might buy BTC when it's faster and easier to get and will now have the ability to take over all human value transactions.

As for the technical issues, there are... solutions to this. (I'll volunteer to help the core team if they want to do it ).

[tbct_mt2]

If Bitcoin was centralized, its price would be much lower than it is now but if looking at many altcoins that still have good prices like Ethereum, Solana, BNB and more top coins that are all (mostly) centralized, except little altcoins like Monero, we can see that even centralization of a blockchain does not result in very low price.

Price comes after value and if a blockchain has its value that comes from its technology, use cases, utilities and adoption in the community, that blockchain and its native currency will have somewhat good value, then price will be good enough.

Will Bitcoin blockchain become centralized in the future?
I don't think so, and I believe that Bitcoin blockchain will maintain its decentralization, censorship-resistance very well.

[Razmirraz]

If Bitcoin was centralized, would the price of BTC go down or up?

The worst possibility is that Bitcoin value will drop significantly in the long term, although there may be a price surge due to faster institutional adoption, but it will only be temporary because Centralization goes against the main fundamentals of Bitcoin, namely decentralization and immunity to censorship. Centralization will leave an extreme impact on the value of Bitcoin in the long term (the potential Bearish cannot be contained) because it has lost its status as a Safe Haven and is also often considered as digital gold, this status is attached to Bitcoin because there is no government or entity that controls it.
Bitcoin will lose its main advantage if it is centralized, causing investors to lose confidence and, in the worst case, mass selling of their assets due to the increasing risk of price manipulation and the government or those controlling it being able to impose strict regulations. Centralization is like a thorn in the flesh or a direct threat to the fundamental value of Bitcoin, although it may bring pseudo-stability due to institutional adoption in the short term, but fundamentally the change from decentralization to Centralization will decrease the value of Bitcoin because it removes its nature as an uncensorable currency.

[Die_empty]

Positive reaction: "Wow, BTC is going to absolutely MOON since adoption will go crazy now that we can use Bitcoin everywhere, I'm buying every sat I can to get on this rocket ship!"

Several factors make the Bitcoin price go high. Adoption is one of them, but we shouldn't overlook the halving and the bull run. Massive adoption might not necessarily lead to an increase in the value of Bitcoin; rather, it might make it a common currency. The reason why we see a massive rise is that Bitcoin is widely used as an asset. I have not seen currency like the dollars going to the moon because of massive adoption. A centralised Bitcoin system might destroy the four-year cycle, which might end the halving and bull run.

Many people or institutions are interested in Bitcoin because no single individual or group of people controls the network. You are right that the market can be manipulated. But centralising the system would make manipulation easier.