Can BTC be regulated and centralized? The answer will surprise you
3 min readOne of the arguments in favor of BTC’s value and uniqueness is the claim that it is decentralized and cannot be controlled. This statement is so often heard by many fans and BTC maximalists that few people think more deeply that it is not entirely true.
Can BTC be centralized?
One of the benefits of BTC blockchain is its decentralization. Miners around the world are involved in maintaining the network, verifying individual transactions, creating new blocks and receiving a reward for it. The concentration of miners around the world varies. The largest is in the USA (37.84%), followed by China (21.11%), Kazakhstan (13.22%), Canada (6.48%) and Russia (4.66%).
If we look at the chart above, we can see that from 2019 to June 2021 China was hegemon in BTC mining China. Subsequently, mining was banned for Chinese policy and the miners had to leave the country and look for alternatives. Since the migration of Chinese miners their influence intensified in Kazakhstan and especially in the USA. With such a redistribution of miners around the world, we may feel that BTC cannot be controlled as its mining takes place around the world. The problem would arise if the mining company or the merger of the miners could influence the network hashes.
51% attack problem
The production of cryptocurrency mining machines is advancing by leaps and bounds. They are producing faster and faster machines and the likelihood of one company such as Bitmain, can affect the hashing power of the blockchain, grows. Portal Investopedia explains how this could happen:
“However, in addition to overtaking other miners, ASIC developers could easily end up controlling more than 50% of the hashing power in the blockchain by effectively blocking non-ASIC miners. When the group controls most of the extinguishing force then abuse the decentralized nature of many cryptocurrencies and even rewrite transactions in an allegedly unchanging distributed ledger. This process is known as 51% attack. “
At present, this is not a threat, but imagine a scenario if one government decides to fully support BTC mining and start concentrating miners on itself. It would create excellent conditions, or perhaps it would do so with force. It’s hard to say how the market and the BTC would react. Maybe this would lead to a massive sell-off of BTC and eventually a collapse in the value of the whole currency. However, what you need to realize is that the threat of BTC centralization is not unrealistic and there is no need to blindly believe that this can never happen.
Regulation and BTC
BTC fans like to argue that BTC cannot be banned. Yes, the network cannot be disabled. However, it is possible to create the conditions for such fear, prohibition or regulation that the price of BTC collapses and becomes worthless as an asset. BTC can’t be banned, but crypto exchanges can. Although most BTC fans are retail investors, they often forget that the price of cryptocurrency has risen, especially with large players. If unfavorable conditions are created for them or they should face sanctions for investing or holding BTC, funds, institutions and the big players release BTC as fast as they rushed into it. Big players don’t care if they believe in the idea of BTC. It is primarily about investment and its profitability. If global conditions change so that it is no longer advantageous for large investors, the price and the entire value of BTC will collapse.
So far, all of the above is unlikely, but it still serves as a warning before the fanatical belief that BTC is a financial salvation and can never end. In the world there is no certain investment and so it is necessary to approach everyone. The goal of investing is not to believe that something will grow and work forever, but to make money. And that’s the way many investors who invest in BTC think.
