With the emergence of financial giants like BlacRock, bitcoin has never been so concentrated. The capture of bitcoins by a few large wallets, as well as the professionalization of mining companies, contribute to a dangerous concentration. With each halving, this trend becomes more pronounced.
“ Bitcoin, because fuck banks ”, could perfectly sum up the anti-system spirit of bitcoin. Taken over by Bitcoin Magazine to illustrate the subversive nature of cryptocurrency, the expression is quite popular among BTC defenders. If destroying bitcoin is now impossible, hijacking it to corrupt it from the inside seems much more realistic.
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Decentralization: the political utopia of bitcoin
Decentralization – or should we say, deconcentration, to separate technology from its use – has always been at the heart of the bitcoin political project. Create a native Internet currency, without any trusted third party and uncensorable: electronic cash 100% independent of institutions. An anti-bank utopia which is a continuation of the work of crypto-anarchists (or cypherpunks).
These radical and marginal computer scientists, with libertarian tendencies, have been active since the 1990s in the United States. They were an important source of inspiration for Satoshi Nakamoto, whose total anonymity was fundamental for the decentralization and survival of the Bitcoin network, unassailable, since it had no leader.
Thanks to the blockchain and the proof of work mechanism, bitcoin has achieved the feat of bypassing banks and states. At least, for a while. Because after 15 years of existence, what is still “punk” left in bitcoin? On closer inspection, the bitcoin market increasingly resembles a classic stock market, where the appetite and greed of large financial players lead the way.
The “whales”, the ultra-rich of bitcoin
First come, first served. This could be the philosophy of the lucky ones who invested early, when bitcoin was barely worth a few dollars. These early investors were able to get their hands on hundreds, even thousands, of digital tokens.
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Bitcoin therefore also has its ultra-rich. In the jargon, they are called “whales”. These big fish have a crucial influence on the price of bitcoin and its ecosystem. Installed at the top of the food chain, they are accused of knowingly manipulating the price of the first cryptocurrency. The site whale-alert.io lists these particularly well-stocked digital wallets.
Among the big owners of bitcoins are prominent billionaires from Silicon Valley. Michael Saylor, the founder of MicroStrategy, thus holds 17,000 bitcoins by himself. Jack Dorsey, another tech mogul, known for co-founding Twitter, is also a real bitcoin evangelist. He had purchased $50 million in bitcoins through his company Square. As for Elon Musk, it is with SpaceX and Tesla that he invests in BTC: 20,000 in total are held in the form of capital.
But the biggest whale of all is Satoshi Nakamoto. Virtually the owner of a fortune estimated at more than 1 million bitcoins, the creator of bitcoin weighs heavily. The equivalent of 66 billion dollars, which theoretically places him in the top 20 richest people in the world.
Bitcoin concentration is not a new phenomenon. In 2021, 2% of network entities controlled 71.5% of all bitcoins, according to Glassnode, while Bloomberg estimated this figure at 95% using another method. While no one agrees on the exact figures, all show that a significant portion of bitcoins is indeed concentrated in the hands of a few entities.
Even if in fact, bitcoin is still more decentralized than in 2010, when a handful of individuals held 100% of digital tokens.
A problematic concentration
The other side of the coin of bitcoin's success is that it has gradually been colonized by financial institutions. In early 2024, BlackRock entered the race, with the launch of a bitcoin ETF. In the space of a few months, the world's largest asset management company took over 275,000 BTC. Ironically, these recurring purchases could well give bitcoin the boost it needs to finally reach $100,000. But despite the euphoria, part of the bitcoin community fears that the worm is already in the apple, and deplores that finance has started to corrupt bitcoin.
The other threat to the decentralization of bitcoin comes from platforms like Binance or Bitfinex. These crypto banks hold cryptocurrencies on behalf of their clients, for a few fees.
Nothing to visibly worry the millions of users trusting them to keep their cryptos warm, rather than doing it themselves, at the risk of losing their funds. The recent FTX affair, however, showed that these companies can go bankrupt, or even go bankrupt. A philosophy at odds with the initial promise of bitcoin, deeply anti-central authority.
Centralization of mining: a growing threat to bitcoin
The problem is that now, these platforms are both judge and party. This is the case of Binance, which has combined its activities with bitcoin mining since 2020. The same company which is accused of abusive practices in France.
Mining is at the heart of the Bitcoin protocol, essential for the proper functioning of the blockchain. It mechanically leads to competition between miners. Consequence: the least profitable are ejected, which tends to create monopolies. However, with the successive halvings which halve the miners' reward, the noose is tightening more and more. This mechanism imposes an increasing sophistication of mining machines, creating a market within the market. Manufacturers must then use graphics cards specially designed for mining, ASICs. Mining is becoming industrialized.
2 companies mine 50% of bitcoins alone
Far from geeks of yesteryear motivated by the idea of a currency peer to peer, Today's miners are seasoned entrepreneurs, concerned about their profitability. They are now organized in mining pool, kinds of virtual cooperatives. They thus increase their chances of winning by pooling their computing power. In 2021, a study of the National Bureau of Economic Research gave an overview of this centralization: 0.1% of miners were responsible for half of the world's bitcoin production.
Today, two companies, Foundry USA and AntPool, share the majority of the pie. They control more than 50% of the computing power of mining pools, endangering the decentralization of the network. However, there is a critical threshold not to be exceeded, and it is precisely set at 50% of the computing power. Above, bitcoin could (theoretically) be hacked if actors collude among themselves to harm the network. But above all, these pools add centralized intermediaries. So that bitcoin transactions become easily censorable.
On his siteFoundry USA displays this salesy, but paradoxical, sentence: “ We are not waiting for a decentralized financial future, we are building it now.” An illustration of the double game of bitcoin, always tossed between its promises of decentralization and the growing appetite of traditional finance players for the cryptocurrency market.