Economist Nouriel Roubini has expressed doubt about the bitcoin blockchain’s true level of decentralization, reiterating fears that its mining mechanism concentrates nodes in the hands of only a few players.
“Worse than North Korea”
Roubini, a famous economist and professor at New York University’s Stern School of Business, delivered a scathing assessment of cryptocurrencies, saying that they are in fact more centralized than many realise. He singled out bitcoin in particular as being an enabler of systemic inequality, also labelling ethereum as the fiefdom of a “dictator” in the person of Vitalik Buterin.
In a post on his Twitter account, Roubini went to the extent of comparing crypto ecosystems to North Korea:
Decentralization in crypto is a myth. It is a system more centralized than North Korea: miners are centralized, exchanges are centralized, developers are centralized dictators (Buterin is “dictator for life” ) & the Gini inequality coefficient of bitcoin is worse than North Korea.
The former US Treasury senior adviser is popularly known for naming Bitcoin the biggest bubble in human history, saying that its value would reduce to nothing.
The Bitcoin network does not have any voting or delegation, meaning that each mined and node select their position based on the version and the approach to running the project. Over 95% of all nodes, however, now run Bitcoin Core, without dissent on the features and the future of the coin.
Fact Vs. Opinion
While Roubini’’s pronouncement may provoke agreement and disapproval in equal measure, the truth as always, is likely to be somewhere in the middle.
In terms of bitcoin mining distribution, Antpool mines over 18 percent of blocks, and four of the biggest pools mine over 60 percent of all blocks, which has sparked fears of collusion in the past. Ethereum has also received criticism because its direction is determined by a small group of developers, and the coin’s evolution is predetermined.
Every crypto coin, however, remains decentralized in principle if not in fact. The much-criticised concentration of Bitcoin mining power among a few mining pools is also the result of the current level of technology available to miners. Crucially, bitcoin and ethereum are still decentralized, which means there is no central entity to make a decision on the state of the ledger or define the future policy. The operations of the ecosystems remain a matter of consensus. Nearly all coins and tokens can have an ecosystem concentrated in the hands of a few large players, or “whales.” No whale, however, has ever taken ownership of bitcoin or defined its direction.
Bitcoin nodes are also making a case for localization instead of centralization. Over 23% of them are found in the US, probably due to the use of cloud services. 19% of them are also located in Germany. Other countries have different concentrations of nodes. This depends on their economic potential as well as the popularity of bitcoin.
