When you look closer, popular bitcoin (BTC) narratives reveal more nuances that raise serious questions about the network.
Bitcoin is widely considered as the most decentralized and invincible blockchain network and the most popular cryptocurrency, governed by highly technically capable experts. These are the popular narratives surrounding this still-emerging technology. However, bitcoin experts have various unpopular opinions that add more nuance to the story.
Three of these unpopular opinions were discussed at the bitcoin-only Baltic Honeybadger conference in Riga this past weekend.
The panelists, a group of popular (pun intended) bitcoiners, tackled the (de)centralization of bitcoin mining, BTC usage for payments, and whether technical knowledge really matters when it comes to making decisions about the future of the bitcoin network.
Let’s dive into each of these in more detail.
Bitcoin mining centralization: A (non)-Issue?
This topic was raised by veteran bitcoiner Alex B, who’s also a writer for Bitcoin Magazine, claiming that bitcoin mining centralization is not a real problem. This might sound strange for those who don’t follow the scene daily, as the general public tends to believe that bitcoin mining is quite decentralized.
However, within the Bitcoin community, there’s an ongoing debate about whether miners suffer from worrying levels of centralization that could hurt bitcoin’s security and censorship resistance. The concept of a 51% attack – where a miner gains at least 51% of the computational power of bitcoin, known as hashrate, and could, for example, double-spend their coins – adds to these concerns.
While there are more nuances to this topic, the centralization of miners could lead to BTC transaction censorship, which is already seen on blockchains like Ethereum (ETH), governed by different types of consensus mechanisms.
However, Alex B argues that these fears are overblown, as it’s unlikely that in a multipolar world, a single entity could gain enough hashrate to censor BTC users, given that bitcoin mining is a very resource-intensive industry. For example, even if the US sanctions something, it’s unlikely that every country would support these measures.
However, another prominent bitcoiner, Giacomo Zucco, noted that countries can sometimes align on global interests, such as taxation. Or, as Bitcoin Core contributor Peter Todd stressed, countries don’t even need to agree on everything – they could attack bitcoin from different angles, which could lead to significant censorship on the network.
In either case, while the panelists largely agree that bitcoin’s hashrate is well-decentralized for now, two more serious centralization risks might threaten the network in the long run.
One is related to the centralization of bitcoin mining hardware. While new hardware manufacturers are entering the market, they all depend on chip makers – a highly centralized industry. As Todd put it, humanity isn’t large enough to support that many chip factories.
However, he noted that this problem is mitigated by the growing number of existing mining computers, known as ASICs (Application-Specific Integrated Circuits), making the market less dependent on new production. Still, this hardware isn’t eternal.
Meanwhile, the centralization of mining pools is seen as less of a problem for a simple reason: independent miners who join these pools can easily switch to another if they suspect misconduct, as has already been done in bitcoin’s history to prevent a pool from abusing its power.
However, as bitcoin podcaster Marty Bent stressed, there might be an issue here, as large institutional miners that join pools are now often contractually forbidden from switching pools at will.
At the time of writing, the two largest mining pools, Foundry USA and AntPool, together controlled almost 60% of bitcoin’s hashrate in a day:
In any case, Alex B offered a positive insight, saying that if the goal of an attack on bitcoin or another cryptocurrency, such as privacy-focused Monero (XMR), is to make money, “there are much lower hanging fruits in the ecosystem.”
“North Korea doesn’t try to 51% attack Monero; they’re just hacking exchanges and DeFi [decentralized finance] protocols,” he said.
Bitcoin payments are losing ground to other cryptos
“It’s not an unpopular opinion, but more like an inconvenient truth, that people are not actually using bitcoin for payments as much as bitcoiners would like,” Marty Bent said.
The numbers also back this truth. According to Sergej Kotliar, CEO of Bitrefill, a BTC and crypto e-commerce store, up until 2021, BTC absolutely dominated as a means of payment in the cryptocurrency world.
“Today, it’s not. It’s stablecoins and litecoin,” he said, adding that there’s been an ongoing neck-and-neck battle between the litecoin (LTC) cryptocurrency and BTC payments via the Lightning Network, a bitcoin scaling solution for the past three years.
Data from other BTC and crypto payment companies, such as CoinGate also back this. Their recent report showed that while BTC still accounts for over a fifth of payments, stablecoins now command more than a third, while LTC payments make up 14% of all transactions. However, LN payments are also growing in popularity, with double-digit growth.
According to Kotliar, earlier hopes that bitcoin’s network effect would eventually bring the majority of payments to this blockchain have not materialized as fragmentation in payment methods continues to increase.
Panelists agreed that the main use case for bitcoin is an unconfiscatable, censorship-resistant store of value, with payments now secondary. Moreover, according to the bitcoiners on the stage, there are likely more crypto traders than BTC users, which incentivizes different kinds of services, such as VPN providers, porn sites, and online casinos, to accept various cryptocurrencies. For some of these services, e.g., payments via the Tron (TRX) blockchain, the user experience might even be better than with BTC.
Speaking of an example involving Tron, a blockchain/crypto asset founded by controversial crypto entrepreneur Justin Sun, Peter Todd stressed that while Tron is likely to fail in the long term due to its poor technology, the chance of failure during a TRX transaction, as long as you don’t keep your savings in TRX, “is actually pretty low.”
Giacomo Zucco added that while bitcoiners might spend BTC just to support the culture, for marketing purposes, or because they simply don’t have other types of money or can’t access particular services with fiat, more often than not, they spend fiat first for financial, not technical, reasons.
“For the same reason, if you’re in Venezuela, and you have bolivars and US dollars, you spend bolivars first,” he said, adding that fiat money is unsustainable due to inflation, confiscation, and censorship.
Politics trumps technology debate in bitcoin’s evolution
This is an unpopular opinion offered by Zucco, who claims that when making changes to the bitcoin protocol, technical discussions are less relevant than political ones.
The bitcoiner reminded the audience of the Blocksize War, which took place from 2015 to 2017 when two competing camps fought over increasing bitcoin’s block size – a move that could have increased network centralization by giving more power to larger players. Back then, the “big blockers” lost the battle, but as Zucco noted, it was a political decision that was crucial for maintaining bitcoin’s independence.
Therefore, as argued during the panel, since only a relatively small group of people understand all the technicalities of bitcoin, someone could just gather a “very loud crowd” to push for protocol changes without evaluating all the potential risks.
However, it’s estimated that this might be more difficult to achieve in the future as bitcoin continues to grow.
In any case, while these are not the only unpopular opinions in the bitcoin space, the ones mentioned above are among the key topics relevant to the future of this network.
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