Is Bitcoin Centralisation a good thing?

In 2008, Satoshi created the Bitcoin protocol with trustlessness as an inherent, critical property of its network. Decentralisation is essential to achieving this goal. Decentralisation gave the Bitcoin network the resilience to survive its earliest stages of development from niche-geek-toy to a sophisticated financial network, withstanding price bubbles, manipulation and attempts to ban it. Decentralisation is antifragile, and bitcoiners from the very beginning have held the maintenance of the network’s decentralisation is a top priority.

Centralisation of development work on the protocol is also something that must be considered.

But what do we mean when we say decentralisation? After some thought its apparent that there are a few things in the bitcoin ecosystem that should have decentralised properties. Hashing power (mining) is what is most often talked about, but centralisation of development work on the protocol is also something that must be considered, Bitcoin is open source after all.

For hashing power, I agree that decentralisation needs to be kept as a top priority, however I want to make the argument that some centralisation for the development of the protocol is something that should be allowed to happen. Centralisation may bring risk, but it also has some corresponding benefits. A degree of centralisation is important if an organism/system has to coordinate its actions with a goal in mind, for example. Think brains in animals, or governments for a country. These are definitely points of centralisation, however the benefits they bring outweigh the risks associated with them. I believe that Bitcoin now is mature enough for other goals to be safely brought to the forefront as priorities.

Ensuring the technology’s ability to scale is one of those goals. If Bitcoin is going to reach mainstream levels of use, the blockchain and the protocol are going to have to be able to deal with these much higher levels of use. I point to the BIPS and the proposed increase of block size from 1Mb to 20Mb as relevant examples of projects being undertaken for the good of Bitcoin that rely on a centralised group of people (Bitcoins core developer team) to make these changes. A hard fork is going to have to happen sooner or later. This isn’t groundbreaking, but it highlights that centralisation in certain respects can have positive outcomes for Bitcoin as a whole.

Centralization would ultimately promote bitcoin  by providing funds for marketing and customer service.

Centralisation of companies ontop of the bitcoin network would bring much-needed customer service and marketing for bitcoin. Centralization would ultimately promote bitcoin  by providing funds to organisations which further the network indirectly helping bitcoin succede.

As with most things, after some analysis it becomes obvious that centralisation of Bitcoin is neither good nor bad. It depends on where the centralisation is occurring and the risks associated. In my opinion each system has its “optimal” mixes between centralisation and decentralisation, and Bitcoin falls strongly on the decentralised side of the spectrum, any businesses that uses bitcoin will be more decentralised than those that do not. Hashing power should not be highly concentrated in a few major mining pools, but its okay for us to trust the core developers to make changes to the protocol which will strengthen Bitcoin.

By | 2015-08-26T11:31:45+10:00 March 30th, 2015|Bitcoin, Decentralisation|0 Comments

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