<p>Ethereum, which is going to use Proof Of Stake, would be under danger.</p>
<p>Bitcoin uses proof of work, which means there is danger if the majority of the <em>hashpower</em> is controlled by a single entity/cartel. This is much harder for governments to hijack, because there is very high demand for new energy-efficient Bitcoin miners. The government would be at loss if they used older miners</p>

CC BY-SA 4.0
2021-07-22T17:04:01.617Z
2021-07-22T17:04:01.617Z
MCCCS
<p>The bitcoin protocol does not grant someone with a large amount of BTC any explicit control or influence over the consensus operations of the network. If someone owned a majority of coins, it wouldn't really make any difference to the rest of the users.</p>
<p>However, there is a little bit of nuance here that wasn't explicitly addressed in @Prayank's (otherwise good) answer, in that an entity with a huge number of coins may have some amount of 'economic influence' over the outcome of a network fork. To explain:</p>
<p>A network fork describes an event where network participants (nodes) disagree on what the valid chain is (in this case, due to a disagreement upon what the consensus rules are/should be), resulting in a network split (with some number of nodes following each chain that is valid in their view). If the fork persists, then any user that owned coins pre-fork, will own coins on both chains post-fork.</p>
<p>This is the crucial point: if an entity owns a <em>huge</em> portion of coins, they may make a point of only adopting the post-fork chain that they prefer, while selling all of the coins on the post-fork chain that they don't prefer (and assumedly, using that money to buy more coins on the post-fork chain that they prefer). This action can push the price of the coins on each fork around, and that price action may influence other market participants to follow suit. Importantly though, note that owning a large number of coins grants the entity no extra influence over the ability to create a rule change / fork, it only allows them to push the price around, post-fork.</p>
<p>All that said, there is even further nuance to the situation, and the game theoretical reasoning around most of it is messy at best. For example, the relative proportion of miners that are pointing hashpower at each post-fork chain is relevant to the conversation (it doesn't matter how much the entity holding a majority of coins wants to push their fork, if no miners are supporting it!). There is also a consideration of soft-fork vs hard-fork (it is perhaps 'easier' to push a soft-forking change, as legacy nodes will still follow the same chain - though again miner participation is again a large and relevant variable that will decide whether or not the network segments).</p>
<p>To further complicate things, there is no way to reliably predict this 'economic influence' over the outcome of a fork in consensus, it is at best only measurable in real-time as it plays out on the free market.</p>
<hr />
<p>To note, this exact sort of situation played out in ~2016-2017, as a large number of prominent businesses and miners pushed to change the consensus rules to their liking. Despite claiming to be an 'economic majority', these entities found themselves unable to force any changes upon the network, and ultimately their goal (naively raising the block size via a hard fork) failed.</p>
<p>Perhaps the lesson to be learned is that the incentives for network participants to stay in consensus are quite large, and thus not even a rich entity can force other participants to change the rules against their will.</p>
<hr />
<p>A final note: the issues described above may become worth worrying about if one entity controls a <em>huge</em> majority of coins. For example, consider what the situation might be if one entity (or just a few colluding entities) were in control of &gt;90% of all coins. In that case, it may be more reasonable to worry about their ability to unjustly influence a consensus rule change on the network. <strong>However</strong>, if one entity obtained that much BTC, then I think there would be other issues that would come up sooner. Assuming that the entity controlling the coins is a custodian for a huge number of users (which seems more likely than one entity actually owning a vast majority of the world's wealth), then it is absolutely relevant to worry about the potential censorship (and privacy) of that entity's depositors, as well as the authenticity of the funds (ie, is this entity only holding a fractional reserve of user funds?).</p>
<p>But this is an extreme situation that seems unlikely to be realized, especially if network participants are aware of the risks, and build out the bitcoin economy/infrastructure in a way that seeks to avoid this (seemingly unlikely) risk.</p>

CC BY-SA 4.0
2021-07-24T12:28:05.177Z
I think this answer should be voted/atleast mentioned in the accepted answerer. Trivially, if an entity owns all 21 mil bitcoin they can set whatever rules they want.
sanket1729
CC BY-SA 4.0
2021-07-22T22:11:13.087Z
2021-07-23T21:25:24.200Z
2021-07-23T21:25:24.200Z
chytrik
<p>This is primarily a hypothetical, but not an impossible one.</p>
<p>If a sufficiently large entity such as a massive company with a lot of cash or the U.S. Federal Reserve were to acquire more than half of the available Bitcoin, would it then become a more centralized type of currency given their control? Some alt coins start out like this, with a single entity owning the majority of the coins so that they can maintain centralized control. Bitcoin has always been against that type of centralization, but if one of these entities decided they wanted to gain centralized control, could they do that by taking the action of acquiring a majority of the coins in circulation?</p>
<p>If so what are the ramifications of that? How would we combat that? Is it a real danger or is my hypothetical a little too paranoid?</p>

<mining-theory><consensus>
Could the threat of centralization be realized if a sufficiently large entity acquired enough Bitcoin?
Jacob Jones
# Could the threat of centralization be realized if a sufficiently large entity acquired enough Bitcoin?

(Asked by: username_0 on 2021-07-22)

This is primarily a hypothetical, but not an impossible one.

If a sufficiently large entity such as a massive company with a lot of cash or the U.S. Federal Reserve were to acquire more than half of the available Bitcoin, would it then become a more centralized type of currency given their control? Some alt coins start out like this, with a single entity owning the majority of the coins so that they can maintain centralized control. Bitcoin has always been against that type of centralization, but if one of these entities decided they wanted to gain centralized control, could they do that by taking the action of acquiring a majority of the coins in circulation?

If so what are the ramifications of that? How would we combat that? Is it a real danger or is my hypothetical a little too paranoid?

**Tags:** mining-theory, consensus


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## 2 answers

### Answer by username_2 on 2021-07-22. Score: 5 | Accepted answer

The bitcoin protocol does not grant someone with a large amount of BTC any explicit control or influence over the consensus operations of the network. If someone owned a majority of coins, it wouldn't really make any difference to the rest of the users.

However, there is a little bit of nuance here that wasn't explicitly addressed in @Prayank's (otherwise good) answer, in that an entity with a huge number of coins may have some amount of 'economic influence' over the outcome of a network fork. To explain:

A network fork describes an event where network participants (nodes) disagree on what the valid chain is (in this case, due to a disagreement upon what the consensus rules are/should be), resulting in a network split (with some number of nodes following each chain that is valid in their view). If the fork persists, then any user that owned coins pre-fork, will own coins on both chains post-fork.

This is the crucial point: if an entity owns a *huge* portion of coins, they may make a point of only adopting the post-fork chain that they prefer, while selling all of the coins on the post-fork chain that they don't prefer (and assumedly, using that money to buy more coins on the post-fork chain that they prefer). This action can push the price of the coins on each fork around, and that price action may influence other market participants to follow suit. Importantly though, note that owning a large number of coins grants the entity no extra influence over the ability to create a rule change / fork, it only allows them to push the price around, post-fork.

All that said, there is even further nuance to the situation, and the game theoretical reasoning around most of it is messy at best. For example, the relative proportion of miners that are pointing hashpower at each post-fork chain is relevant to the conversation (it doesn't matter how much the entity holding a majority of coins wants to push their fork, if no miners are supporting it!). There is also a consideration of soft-fork vs hard-fork (it is perhaps 'easier' to push a soft-forking change, as legacy nodes will still follow the same chain - though again miner participation is again a large and relevant variable that will decide whether or not the network segments).

To further complicate things, there is no way to reliably predict this 'economic influence' over the outcome of a fork in consensus, it is at best only measurable in real-time as it plays out on the free market.

---

To note, this exact sort of situation played out in ~2016-2017, as a large number of prominent businesses and miners pushed to change the consensus rules to their liking. Despite claiming to be an 'economic majority', these entities found themselves unable to force any changes upon the network, and ultimately their goal (naively raising the block size via a hard fork) failed.

Perhaps the lesson to be learned is that the incentives for network participants to stay in consensus are quite large, and thus not even a rich entity can force other participants to change the rules against their will.

---

A final note: the issues described above may become worth worrying about if one entity controls a *huge* majority of coins. For example, consider what the situation might be if one entity (or just a few colluding entities) were in control of >90% of all coins. In that case, it may be more reasonable to worry about their ability to unjustly influence a consensus rule change on the network. **However**, if one entity obtained that much BTC, then I think there would be other issues that would come up sooner. Assuming that the entity controlling the coins is a custodian for a huge number of users (which seems more likely than one entity actually owning a vast majority of the world's wealth), then it is absolutely relevant to worry about the potential censorship (and privacy) of that entity's depositors, as well as the authenticity of the funds (ie, is this entity only holding a fractional reserve of user funds?).

But this is an extreme situation that seems unlikely to be realized, especially if network participants are aware of the risks, and build out the bitcoin economy/infrastructure in a way that seeks to avoid this (seemingly unlikely) risk.

> **Comments:**
> **username_3**: I think this answer should be voted/atleast mentioned in the accepted answerer. Trivially, if an entity owns all 21 mil bitcoin they can set whatever rules they want.  

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### Answer by username_1 on 2021-07-22. Score: 0

Ethereum, which is going to use Proof Of Stake, would be under danger.

Bitcoin uses proof of work, which means there is danger if the majority of the *hashpower* is controlled by a single entity/cartel. This is much harder for governments to hijack, because there is very high demand for new energy-efficient Bitcoin miners. The government would be at loss if they used older miners


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