Bitcoin’s core philosophy as a decentralized cryptocurrency is under pressure, according to Kadan Stadelmann, CTO of Komodo. According to Stadelmann, a development is underway that could damage Bitcoin to its core.

This shift from the so-called basic principles could redefine Bitcoin’s role in the financial landscape. Do we have to worry?

Power to large mining pools

Since its launch by Satoshi Nakamoto in 2009, Bitcoin has been hailed as a game-changing force for financial autonomy and freedom, free from the control of centralized financial institutions. However, recent developments appear to go against this ideal, pushing Bitcoin towards what Stadelmann calls a “centralized paradox.”

One of the most important indicators for this trend is the concentration of mining power in the hands of a small number of mining pools. Foundry USA and Antpool, for example, together now control more than 50% of Bitcoin’s total hashrate. This concentration is even more worrying when you consider that more than 80% of the mining power is in the hands of just five pools.

Distribution of Bitcoin’s network hashrate – Source: Statista

Government and regulation interfere

The influence of governments and regulators further complicates the picture. For example, the North American Blockseer pool not only meets but even exceeds the compliance standards of the US Office of Foreign Assets Control (OFAC).

This compliance introduces a level of government oversight and control that was previously absent, diluting Bitcoin’s decentralized promise.

“In short, a small minority of miners control substantial resources, which undermines the decentralized philosophy that Bitcoin claims to uphold. This scenario calls into question the egalitarian nature of Bitcoin and opens conversations about the real beneficiaries of this digital currency,” said Stadelmann.

American institutions are taking over

Stadelmann also fears that the growing involvement of major financial institutions in Bitcoin mining signals another shift toward centralization.

For example, BlackRock has acquired significant stakes in two leading Bitcoin mining companies, 6.71% in Marathon Digital Holdings and 6.61% in Riot Blockchain, with investments of nearly $383 million. Since 2014, Fidelity Group has been actively mining Bitcoin. Vanguard, on the other hand, owns about 17.9 million shares in Riot Platforms and 17.5 million shares in Marathon Digital.

And it’s not just about financial investments. In January, BlackRock further integrated Bitcoin into the mainstream financial market by launching a Spot Bitcoin ETF. This new financial instrument now controls 272,800 BTC, worth $17.20 billion. BlackRock also has a lot of economic power within the network.

“The increasing influence of these financial giants on Bitcoin could lead to a scenario where decision-making and control over the network is concentrated in the hands of a few, rather than being distributed among a diverse group of participants,” Stadelmann added.

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