The single flaw in bitcoin

[snobbus]

Centralization of Bitcoin seems hard to avoid with how bitcoin mining works. Small companies are able to compete with larger cooperation due to faster decision making, patents on innovations, working climate, and so on. However, I see it very hard to get an edge as a smaller miner competing with larger mining operations, this should in theory make the network end up with only one or a few big miners.

Why would people trust these few operators to run the network, instead of for example big banks who issue their own "Bankcoin" on the bank's own servers? The "Bankcoin" could probably go mainstream quicker if trusted, since it would be able to be as fast and cheap as Bitcoin. If bitcoin becomes too centralized it should also become more easy to regulate, since only a few players control the network, this regulation would then probably effect both Bitcoin and "Bankcoin" in the same way, this could remove the price advantage of Bitcoin vs credit cards or "Bankcoin". "Bankcoin" should be able to implement other features that bitcoin has as well, for example the inflation and total amount.

What I mean by "Bankcoin" is a coin that is not linked to fiat currency, just in the same as bitcoin, the supply and demand sets the price. Bitcoin as a technology can maybe still have other uses, this is only about the currency.

I really want to believe in Bitcoin's future as a currency, but I can simply not figure this one out so I hope to get a good discussion about this issue!

[amaclin]

Good questions

Why would people trust these few operators to run the network

They would not.

If bitcoin becomes too centralized

It will. The right question is when?

[H.W.Z]

The 51% attack threat is sensitive and solved by the big miners' own discipline. I don't think it is a problem.

[snobbus]

The 51% attack threat is sensitive and solved by the big miners' own discipline. I don't think it is a problem.

The post is not only about the possibility of a 51% attack, being centralized makes the whole network vulnerable if the big miners for some reason was shut down by regulators, among other risks.

Being more easy to regulate due to centralization would also, risk it being more regulated as a currency, making it as costly to use as a normal currency.

[Elwar]

Welcome to Bitcoin!

[BittBurger]

Isn't there something we can do about it?

Im told Bitcoin is "programmable money".

Does the dev team know that? 

-B-

[bornil267645]

Well... Nobody's perfect...

[Verse]

Have you read the whitepaper? https://bitcoin.org/bitcoin.pdf

It discusses how centralized payment processors are fundamentally flawed because they provide a centralized entity to dispute transactions with. A "bank" cannot even issue such a currency due existing regulation; the SEC would likely view such a currency as an unlicensed security offering. Look into IPO regulation if you're interested. It's an expensive thing.

Furthermore Bitcoin's finite eventuality is not centralization. Miners are profit seekers. Mining profits are a function of exchange rates and market share. The difficulty for solving a block has been growing exponentially and unsustainably. A small operation can enter and exit the mining pool more easily than larger operations which require long contracts and massive overhead. Therefore, as Bitcoin's price fluctuates, we should witness a dynamic mining pool where smaller operations who pool together have an advantage over larger operations.

Additionally these new ASIC chips will only become cheaper as economies of scale comes into effect, and manufacturers cannot increase processing power indefinitely. Therefore we should see the mining pool consist majorly of the price efficient, older chips in the near future as the marginal return on more advanced chips continues to decrease for the market's purposes.

The growth in mining we are witnessing now is not indicative of how the market will act in the long run.

[nicked]

The flaw in Bitcoin is the fact that human beings are involved.

[CtrlAltBernanke420]

Centralization of Bitcoin seems hard to avoid with how bitcoin mining works. Small companies are able to compete with larger cooperation due to faster decision making, patents on innovations, working climate, and so on. However, I see it very hard to get an edge as a smaller miner competing with larger mining operations, this should in theory make the network end up with only one or a few big miners.

Why would people trust these few operators to run the network, instead of for example big banks who issue their own "Bankcoin" on the bank's own servers? The "Bankcoin" could probably go mainstream quicker if trusted, since it would be able to be as fast and cheap as Bitcoin. If bitcoin becomes too centralized it should also become more easy to regulate, since only a few players control the network, this regulation would then probably effect both Bitcoin and "Bankcoin" in the same way, this could remove the price advantage of Bitcoin vs credit cards or "Bankcoin". "Bankcoin" should be able to implement other features that bitcoin has as well, for example the inflation and total amount.

What I mean by "Bankcoin" is a coin that is not linked to fiat currency, just in the same as bitcoin, the supply and demand sets the price. Bitcoin as a technology can maybe still have other uses, this is only about the currency.

I really want to believe in Bitcoin's future as a currency, but I can simply not figure this one out so I hope to get a good discussion about this issue!

If anyone has any desire to see the world take a giant leap forward, they must allow bitcoin to function in its original form. In its original form, all sort of advancements, efficiencies and other major techological good events will occur. The current monetary system is so beyond broken it can not be fixed, and to try and regulation bitcoin like the current system is just a waste of time. Just ban bitcoin completely or let it does what it is designed to do... Motheruckers!

[p2pbucks]

mining indurstry works fine .
The only thing i care about is the centralized pricing market , exchanges are not btc believers , they are manipulating the price and sucking blood from whole btc world . Community should develop p2p trading market ASAP 

[Bitcoinpro]

bank coin, thats exactly wat fiat already is

the bank infastructure is not needed anymore or the workers,

Crypto is self managed and secured, a goverment take over of

banking is needed to wind down the opetations and keep some

in reserve for when fiat might be needed for natrual disasters etc

[SpontaneousDream]

Is centralization even that big of a deal? People don't care if Bitcoin is centralized or not- what matters is the utility of the technology and how well it works.

[Willisius]

Is centralization even that big of a deal? People don't care if Bitcoin is centralized or not- what matters is the utility of the technology and how well it works.

This is incorrect, extremely so. Without decentralization, why would anyone care about Bitcoin?

[jeffersonairplane]

Decentralization is important to me in crypto, without decentralization Bitcoin would not have much value over traditional fiat currencies other than the fact that it can be exchanged in a digital form, which fiat already has (eg. PayPal).

[pat1900]

Community should develop p2p trading market ASAP 

The technology already exists: ZeroReserve. Just needs a few more volunteers for beta testing.

[cyberpinoy]

Nothing is stopping the banks from creating their own altcoin currency, and I can almost bet before they would ever adopt Bitcoin or accept it, they would indeed create their own. I would love to see the ANN page on that coin HAHA. as far as small miners, if you have discipline and a good business mind any small miner could become a large miner. It takes time, intelligence and hard work, but it can be done. I think once this is all on going in a few more years the ones left mining will be the ones who stuck it out used their heads and did their homework.

I dont think anyone would be trusting any person or company to run the network, you would be trusting their machines to do the work. after the next halving in rewards you will indeed see a sifting of miners.A LOT of miners will at that point will have no choice but to give up. because even then mining in a pool for a small miner will be useless. If not in the next halving most certainly the halving after that.

The 51% attack will become the talk of the town once miners start leaving. and what pools and miners that are left behind will be your network. If a bank controls the 51% attack threat you can bet your sweet ass they will attempt to make an attack, thats how banks are, they dont care about anyone or anything but themselves. I think if anyone would be the ones to attempt a 51% attack it will be a bank before anyone else.

you kmake some very good points which just goes to show time is rapidly running out for those who wish to get into mining for BTC. Because soon it is going to be to late to start.

[johnyj]

Centralization of Bitcoin seems hard to avoid with how bitcoin mining works. Small companies are able to compete with larger cooperation due to faster decision making, patents on innovations, working climate, and so on. However, I see it very hard to get an edge as a smaller miner competing with larger mining operations, this should in theory make the network end up with only one or a few big miners.

In fact, individual miners with free electricity could lasts much longer in a hash war. When difficulty skyrocket, large mining operation have huge amount of electricity and cooling cost,  they will very quickly become unprofitable, unless all their cost in a few years are covered by a VC

[cbeast]

Centralization of Bitcoin seems hard to avoid with how bitcoin mining works. Small companies are able to compete with larger cooperation due to faster decision making, patents on innovations, working climate, and so on. However, I see it very hard to get an edge as a smaller miner competing with larger mining operations, this should in theory make the network end up with only one or a few big miners.

In fact, individual miners with free electricity could lasts much longer in a hash war. When difficulty skyrocket, large mining operation have huge amount of electricity and cooling cost,  they will very quickly become unprofitable, unless all their cost in a few years are covered by a VC

Where can I find free electricity? I want gigawatts!

[bassclef]

The post is not only about the possibility of a 51% attack, being centralized makes the whole network vulnerable if the big miners for some reason was shut down by regulators, among other risks.

If the big miners were shut down, difficulty would go down and everyone would start mining again. You do understand about difficulty, right?