Are We Measuring Bitcoin’s Decentralization The Wrong Way?

[Sammysmart001]

Most of the time when we bring up the discussion of Bitcoin being decentralized, the discussion quickly point towards the number of miners, users or holders and nodes.
But I come to think of this differently. To tell us about how decentralized Bitcoin actually is, are this things really enough?

For example, if large number of people holding Bitcoin today, decides to keep their coins on exchanges does this means that there is more decentralization? Eventually we can be having many nodes but if most of our ordinary users still depends on centralized services to interact with Bitcoin, what part of decentralization are they actually experiencing ?

Same thing can also be looked at, from exchange, mining, infrastructure and even custodians. Numbers being increased in one area may not necessarily mean that control is becoming more distributed.
So i don’t think that the biggest question should be that how decentralized Bitcoin is ? But it should be, what should be measured when we are taking about Bitcoin decentralization ?

When judging it, what do we think matters more

1. Is it the distribution of nodes
2. Ownership
3. Economic activity
4. Mining power
5. Self custody ……. Or somthing else ?

[Karl_3000]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

[Livingleged]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

I feel like you saying the exchanges own the coin on the blockchain is not quite technically accurate. Bitcoin doesn’t record legal ownership. The blockchain records UTXOs controlled by the script, and whoever controls the relevant private key should be able to authorise spending. With a custodial exchange, the exchange controls the key and user have a contractual claim against the exchange.

But I fully agree with your point which is pointing at ownership should not be treated as samething as bitcoins decentralisation. The important  part is who influence over the rule and validation of the work. Like you have said exchange cannot decide which block are valid or try to force node operators and miner to accept their own preferred rule. Node independently verify the blockchain, while miners compete to produce blocks according to the rule they follow

[Tungbulu]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

I get what you’re the to say but exchanges don’t own Bitcoin on some separate chain, what they actually do is to control the private keys for the coins held in their custody. The users in this case don’t have a direct on chain control of their coins but rather they generally have a claim against the exchange.

Again, decentralization is way broader than just miners and nodes, you need to also understand that Bitcoin’s resistance to centralized control is equally dependent on users, developers and businesses and everyone who are independently following the consensus rules.

It’s not possible for any exchange to unilaterally change Bitcoin, but that doesn’t mean that its influence doesn’t matter though, especially through the chain and software that it chooses to support.

[Hypnotizer]

Most of the time when we bring up the discussion of Bitcoin being decentralized, the discussion quickly point towards the number of miners, users or holders and nodes.
But I come to think of this differently. To tell us about how decentralized Bitcoin actually is, are this things really enough?

For example, if large number of people holding Bitcoin today, decides to keep their coins on exchanges does this means that there is more decentralization? Eventually we can be having many nodes but if most of our ordinary users still depends on centralized services to interact with Bitcoin, what part of decentralization are they actually experiencing ?

The definition of decentralization is the inability of the centralized entities to make decisions or have direct control over the system, so even if large numbers of people decides to keep their coins with Centralized institutions it doesn’t directly affect the decentralization of Bitcoin.

The discussion about decentralization always point towards miners, nodes and users because they’re the ones that makes it decentralized, everyone has a right to make the decision and the majority wins, that’s decentralization.

Talking about the part of decentralization the people in the second paragraph experiencing, it’s the experience of using something no central authority has control over and a single company or organization can’t make any decisions about it without everyone agreeing to it.

[TrialBitcoin]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

Bitcoin’s decentralization is primarily about the network’s independent nodes and miners, not simply who owns the coins. Exchanges can custody users’ BTC, but they don’t control the Bitcoin protocol or have unilateral power over nodes and miners. Forks ultimately depend on what participants choose to run and accept. That’s also why self-custody matters: ownership and control of your coins are separate from control of the network itself.

[9ja Amaka]

The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users.

This is a bit misleading for anyone who reads it. I understand you're pointing towards "not your keys, not your coins," but technically the exchanges do not own the coins. They hold the key to the coins, and the user decides when that key is meant to be used. However, whoever holds the keys may decide to access the coins despite the agreement binding the owner and whoever holds the key, and it is the reason why the "not your keys...." statement originated.

As far as exchanges, government, leaders, economy cannot alter the consensus mechanism of the blockchain and cannot decide for miners and node protocols, bitcoin is remains decentralized.

[Karl_3000]

The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users.

This is a bit misleading for anyone who reads it. I understand you're pointing towards "not your keys, not your coins," but technically the exchanges do not own the coins. They hold the key to the coins, and the user decides when that key is meant to be used. However, whoever holds the keys may decide to access the coins despite the agreement binding the owner and whoever holds the key, and it is the reason why the "not your keys...." statement originated.

As far as exchanges, government, leaders, economy cannot alter the consensus mechanism of the blockchain and cannot decide for miners and node protocols, bitcoin is remains decentralized.

I am not talking about not your keys not your coins, what I am taking about is that bitcoin network is decentralized, that the centralized exchanges that he said people are having the bitcoin and others like that do not have control on the bitcoin network but they depend on the bitcoin network, they are also not having their own blockchain that is regarded as bitcoin blockchain.

[casey15]

The whole concept of decentralisation is that one person or an organisation does not have control to make decisions about the currency that it affects everybody else. The miners and nodes are stíll the backbone of the Blockchain. Even with your analogy, if something like this happens, the exchange still does not have a direct control or is till not at the position to make decisions on behalf of all the bitcoin holders.
As long as nobody can just wake up one morning to say he wants to take the price of bitcoin to $0 then it is very much still decentralised

[Pablo-wood]

Our choice of custody doesn't affect Bitcoin's censorship resistance. Bitcoin at the protocol level is decentralized regardless, there are  thousands who independently run nodes and validate  the chain, and no single custodian, exchange, or entity controls consensus. What custody changes is a personal risk, not a network one, if you hold our coins on a centralized platform, that platform can freeze or restrict our access, but that's a failure of our own custody setup, not a failure of Bitcoin's decentralization. The protocol keeps confirming valid transactions regardless of who's holding what, where and how.

[Wiwo]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

Excellent, bitcoin decentralization is about the nodes, and the layers and individual to which layer their trust.

Remembering that nodes and validation source determine what category of decentralization the transaction Carrie.

Bitcoin layer1 chain can be the most decentralized major chain, whereas the layer2 network like the lightening network could bring in the cheap nodes transactions but centralised chains, this brings us to the conclusion that bitcoin is as decentralized as to who, which layer they decides.

[Coyster]

I'm surprised about your quest to make something so simple, look so complicated, lol. Decentralization basically means no entity controls the network and anyone can run a node and join in enforcing the consensus rules. What anybody does with their coins doesn't reflect bitcoin's true nature. If you store your coins in custodial platforms for example, they control your own keys and not the network.

[Sammysmart001]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners.

 I understand with you that when we are taking about Bitcoin network itself miners  and nodes are very much important this is because exchanges cannot just decide which consensus rules the network should follow. But what my question is pointing at, was more about whether if looking only at those part gives us full picture of decentralization. Like for example, if large part of the economic activity depends on a few things exchange or custodians that might not control consensus but for users they can still become an important points of dependence.

Decentralization basically means no entity controls the network and anyone can run a node and join in enforcing the consensus rules.

I so much agree with you on this definition, and this were my question become much more interesting. We’re if anyone can run a node, this give Bitcoin an important level of decentralization at the protocol level. But should we look at how many users takes advantage of the ability rather then depending on centralized services ? Or we should stop measuring there. Maybe there is a difference in between Bitcoin being decentralized by design and that of how much decentralization users actually experience in practice.

[MainIbem]

...

I am not talking about not your keys not your coins, what I am taking about is that bitcoin network is decentralized, that the centralized exchanges that he said people are having the bitcoin and others like that do not have control on the bitcoin network but they depend on the bitcoin network, they are also not having their own blockchain that is regarded as bitcoin blockchain.

Right, Bitcoin isn't controlled by any entity, the exchanges per say are businesses that depend on the Bitcoin network they can't control the blockchain but can have access to the coin or coins of customers that store there's with them. A perfect analogy is for instance a tenant renting a store build by his landlord, he doesn't own the store but only using it for business. Bitcoin network is the landlord while exchanges are tenants renting the store for business.

[Cookdata]

b]When judging it, what do we think matters more [/b]

1. Is it the distribution of nodes
2. Ownership
3. Economic activity
4. Mining power
5. Self custody ……. Or somthing else ?

They all matters but two in the list are subjective in my opinion which are economy activities and self custody. If Bitcoin is concentrated on some individuals, it doesn't affect the network, the effect is on the Bitcoin price and not the decentralization of the network.

The nodes and miners are the most powerful brokers of Bitcoin network, you can't make decentralization without protecting the protocol itself. Without decentralized miners and nodes, the network can be easily manipulated irrespective of which of the nodes, whether it's pool nodes and miners or individual nodes or solo miners, they need to be decentralized as far proof of work is concerned.

There is no ownership where there is decentralization. If there is, nobody can claim ownership of the network. Bitcoin is a open source network, all work are done by developers, the upgrades, the patch and all are done by developers.
It's only in a centralized network you can have team that make decisions for the network and indirectly are the owners of the network. Some of even have kill switch.

[Charles-Tim]

I'm surprised about your quest to make something so simple, look so complicated, lol. Decentralization basically means no entity controls the network and anyone can run a node and join in enforcing the consensus rules. What anybody does with their coins doesn't reflect bitcoin's true nature. If you store your coins in custodial platforms for example, they control your own keys and not the network.

Some people think that when many people are using something, the thing have control or something. So as many people are holding their coins on exchanges, he thinks exchanges should be regarded, but which is very wrong. Those exchanges are not different from everyone of us that has coins on the blockchain in power and they do not have anything to do with bitcoin network unless they are miners or node runners. If they are miners or node runners, that is the part they are contributing and not with their exchanges.

[Donk1]

Well if I may say to me even if there are millions of users who make use of Bitcoin every day, that does not theoretically make Bitcoin decentralized if most folks still decide to keep their coins on exchanges. It's easy to say as long  as there is some one in charge you certainly do not have full ownership over your coin. Best to say true decentralization is censorship resistance, and anything that has to do with the government or even big companies isn't considered decentralized. That's why as a Bitcoin enthusiast, to be truly decentralized you must prioritize self custody and take responsibility for our actions, because a person who isn't responsible can easily fall short when it comes to how to protect their funds. That's all........

[ColdLava40]

Bitcoin decentralization is about nodes and miners, it is not about ownership. The exchanges owns the coins on the blockchain, not owning it on their own private chain despite that the coin belongs the the exchange users. The exchanges do not have say over miners and node runners. If there will be any soft or hard fork, the exchanges and centralized sites that you are taking about have no say.

I think we are confusing participation with ownership here.

Exchanges, institutions, you, and I can all participate in the Bitcoin ecosystem. Forget the fact that institutions and exchanges manage coins for other people or investors. At the end of the day, if you hold your Bitcoin yourself, you control the private keys.

The centralization comes from the external layers created by these institutions and exchanges. When people choose to let someone else manage their Bitcoin, they are no longer directly controlling their coins or participating in the network in the same way. They don't control the private keys, the custodian does.

So, in the case of custodial exchanges, the exchange controls the keys to the Bitcoin held on behalf of its users, while the users only have a claim to those coins.

[Alvin_talk]

For example, if large number of people holding Bitcoin today, decides to keep their coins on exchanges does this means that there is more decentralization? Eventually we can be having many nodes but if most of our ordinary users still depends on centralized services to interact with Bitcoin, what part of decentralization are they actually experiencing ?

Lol. Do not be fooled bro, I'll suggest you take a nap

First of, It's their choice, they chose to go for exchanges. So long as holding bitcoin in a decentralised manner is still possible, you don't hold bitcoin accountable if you fail to use it the right way it was meant to be used. The answer is sitting right before you. Bitcoin in itself is decentralised in nature. Exchanges can't change this property of bitcoin because they don't manage the blockchain. Get it straight; exchanges that manage your keys are not part of the nodes nor are they part of the blockchain, so why involve bitcoin for another entity's centralisation practices.