Bitcoin is still the most valuable digital asset and its security is being guaranteed by the community of miners and providers. Such providers as CoinFly eliminate fears of users about the centralization.
Thing is, we cannot measure the success of blockchain using one parameter. There are several factors that come into play, and yes, the community is still paramount. Reason? Well, the source code of leading projects like Ethereum, Bitcoin, and Ripple‘s XRP, is open. It is available for individuals that can decide to “play” and even fork it.
This could explain the many splits of Bitcoin source code since 2009 when the tons of possibilities enabled by Bitcoin infiltrated the mass media. We have had Bitcoin Cash, Bitcoin Private, and several others. It doesn’t really matter because as it is, Bitcoin is still king.
But Bitcoin as a protocol is nothing without the involvement of active developers, punters, investors, and true believers. The community of miners and providers guarantees the security of the world’s most valuable digital asset.
The anonymous founder Satoshi Nakamoto implemented the Proof-of-Work consensus algorithm that made it mandatory for nodes, willing to compete for the 12.5 BTC released after every successful block, to invest in expensive (and on-demand) mining gear.
The Age of ASICs and Centralization Questions
Competition is cut-throat. Because of application-specific integrated circuits (ASICs), mining from CPU—and perfect decentralization, is out of the question. Even GPU mining in Bitcoin won’t simply cut it. Only the latest energy-efficient, high hash rate mining equipment joining forces to form a coalition of miners called pools can compete in the heavily industrialized mining scene for a share. Regarding Bidl the first mining pool was created in November 2010 and called Slush Pool.
And it is not even guaranteed because there are thousands of mining pools and farms distributed across the globe angling for the same block released every 10 minutes. The industrialization and the requirement of heavy investment in specialized ASIC miners calls into question whether Bitcoin is truly “decentralized” as designed by Satoshi Nakamoto.
Contrary to what should have been expected, Bitcoin is classified as a truly decentralized network by most regulators. The U.S. SEC, for example, has endorsed Bitcoin and Ethereum. As such, their native currencies, BTC and ETH, are utility assets.
However, there are many ways of interpreting this.
Community Is Decentralized and Members Are Agents
Bitcoin as a network has grown by leaps and bounds over the years. From a mining perspective, the evolution from CPU to ASIC shows how strong the demand is and how community members distributed across the globe makes it easy for even more users to participate.
For example, CoinFly which is a portal where users—with little or prior knowledge of mining, can be connected to honest mining pools, have flourished. To further easy things for their users, they have a crypto operating system which has a monitoring module with readily available mining hardware support.
Additionally, since miners are aggregated from the rest of the world, this represents distribution and decentralization since CoinFly and similar providers won’t exist without the community of miners funneled into select mining pools. This in a way, trumps the centralization question.
Expanding Bitcoin Ecosystem
On another plane, the distribution of coin holders as revealed by the number of unique addresses could be another way to measure the level of BTC decentralization. Unlike emerging projects serving the finance niche where over 50 percent of the total supply is held by a few individuals, BTC ownership is distributed evenly and no one individual can claim majority ownership. Mined Bitcoins are held by institutions, retailers, governments, and traders.
Ahead of May 2020 halving, GlassNode—a blockchain data provider, notes that there has been a marked increase in activity and specifically, the number of active Bitcoin addresses shot up 19 percent in March. Coincidentally, in March, the price of Bitcoin—and the crypto market, sunk as the spread of coronavirus disrupted activities in China, Europe, and the United States.
“The active entities metric represents Bitcoin’s active addresses, clustered to remove in-house transactions. Its increase represents a change from the relatively lower levels of activity seen after the crash of March 2020, and may indicate new investors entering the market”.
“As global markets continue to see massive uncertainty and instability – and traditional “safe haven” assets such as oil plummet in price – BTC is becoming a more attractive asset, acting as a hedge against traditional financial markets”.
As observed, the number of Bitcoin addresses continues to surge quarter to quarter cementing the coin’s position as a utility that is scarce and valuable. Bitcoin serves different purposes. It can be a store of value competing with gold, a speculative asset for trading, and electronic money where it is treated as a medium of exchange.
Interestingly, one need not buy, set-up, and maintain gear to mine Bitcoin. The presence of providers such as CoinFly—who in Q3 2020 plans to introduce an AI-based hardware overclocking settings and video surveillance, makes it easy for users, only highlights how the growth of the Bitcoin ecosystem is more important than fears of miner centralization.
Cryptocurrency investor, journalist, analyst, and growth hacker. I cover crypto, blockchain, crowdfunding, and education.