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Is Bitcoin Centralized Or Decentralized?

Is Bitcoin Centralized Or Decentralized? - Gadgets Africa

People who have some idea about cryptocurrency know that the issue of decentralization is a massive part of it. While talking about the concept of crypto, whether its mining is centralized or not is something everyone ponders upon. Regarding bitcoin and its mining, the query regarding the whole process being centralized is always a matter of argument. With regard to bitcoin trading, people may trade at this page to get the best services in the cryptocurrency field, like useful tools that will help them trade successfully. 

Some people think that as the mining pool is distributed, the whole process makes bitcoin a distributed system of working. As the has rate has its presence across various jurisdictions, it is more of a well-distributed scenario. The second element is the volume of manufacturers creating the mining hardware. 

Defining Decentralization And Centralization

Before understanding whether bitcoin is centralized or decentralized, it is mandatory to understand the meaning of these concepts. When talking about decentralization, it’s mostly a concept that multiple people run. The rule of majority comes to play there in such a situation. Here, the whole process includes the supply of bitcoins to a considerable network of participants, which can be done in isolation. 

At the same time, to understand whether bitcoin is essentially centralized or decentralized, one has to understand its working ever since it was invented in the first place. In reality, mining was more of a decentralized process than a centralized one. Whether centralized or decentralized, investors make sure to benefit from it by buying cryptos and then managing them.

The following explanations make things even more explicit:

Coordination Through Mining Pools

The need to keep the mining process continuous is necessary to make the whole system for buying and selling bitcoins. This also requires some level of coordination amongst the miners working independently. Without coordination, the miners may have to spend extra time managing the total network hash rate. 

With coordination being in place, the time required to find the blocks that are proportional to the network hash rate slows down. Miners then work together and split their rewards, which helps them augment their productivity.

Ownership Of The Mining Equipment

Another thing that decides the fate of bitcoin being centralized or decentralized is the mining equipment and its distribution. In terms of ownership, whether the equipment used is distributed amongst several miners or concentrated in a few hands decides its level of centralization.

The equipment’s distribution in the geographical area is also a significant criterion for deciding the centralization issue. If the legal jurisdiction of the mining equipment is well spread across the geographical space, we can’t call bitcoin to be a centralized system of working. This, in a manner, distributes and spreads the bitcoin network across a wider geographical area. 

Production Of Energy

Another concern when it comes to the decentralization of bitcoin is the production of energy. The burden will be reduced if the power generation capacity is distributed amongst the miners across a wide geographical area. This is reasonably related to the previously discussed ownership of the mining equipment. 

Solo mining of bitcoin is indeed challenging. It doesn’t only overburden the miner but also affects the geographical area where the bitcoins are mined. This is because the environmental effects of mining are pretty high. Hence, accumulating all the equipment and processes in a single space is not productive.

Decentralized Bitcoins

When mining is distributed in a broader space to make it efficient and effective, it becomes more of a decentralized system than a centralized one. Hence, this also gives some pointers to those arguing whether Bitcoin is essentially centralized or decentralized.

Final Thoughts

One can say that the buying and selling of bitcoin could be decentralized as no central authority oversees its actions. At the same time, the mining process is also decentralized if the mining equipment and energy production are spread across various geographical areas. This way, it makes the working of the whole system structured and distributes its benefits and effects among various miners. It also ensures that the burden of environmental effects is not accumulated in a single space but is distributed well.

Cover photo by Michael Förtsch on Unsplash 

DISCLAIMER: This article is sponsored and does not substitute for professional advice or help. Any action you take upon the information presented in this article is strictly at your own risk and responsibility.

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