Is Bitcoin As CURRENCY Decentralized?
Let’s first look at what centralized means. For a traditional payment or EFT, a specific go-between is needed – the bank. This is an example of a centralized system where a single entity is vital for a transaction to occur.
Bitcoin is a distributed currency, meaning no bank or go-between is needed for us to exchange it, just a network of senders and receivers transferring coins in a peer-to peer fashion.
Is Bitcoin MINING Decentralized?
Something is centralized if there is one controlling entity, or an entity with a majority share. Have a look at the hashrate distribution of all the mining pools below. If the three large ones on the right teamed up, a larger than 50% powerblock could form, and this majority vote could compromise the security of bitcoin.
In the heydays of bitcoin, anyone with PC at home could mine bitcoin. But as the price started climbing, professional mining pools were formed using dedicated ASIC processors, optimized for bitcoin mining. Today, these mining pools are mostly based in China, raising fear of a mining powerblock that could promote forks or changes to bitcoin for its own purposes. One company, Bitmain, has emerged as the leading source of hashing power and accounts for 28.9 percentage of processing power on the bitcoin network.
Bitcoin’s Limitations – Is Decentralization the Answer?
The scaling issues of Bitcoin are well known. The cryptocurrency simply is not suited to widespread daily use. There are inherent difficulties to the cryptocurrency network that make for unacceptably long transaction times, exorbitant electricity demands, and vanishingly small opportunities for individual miners.
Also read: [6 Dangers Ahead for Bitcoin]
There have been many proposals to counter these inherent weaknesses of the Bitcoin protocol, and decentralized mining represents many of the stronger propositions. This allows for vastly faster applications of the blockchain protocol, but there are serious questions of security and long term usability raised by leaving the central authority behind.
But Wait, There Is Another
Some alt coins, like Groestlcoin and Vertcoin, forks like Bitcoin Diamond and Bitcoin Gold, have created conditions favorable systems to encourage decentralized mining. This was accomplished by making their mining algorithms ASIC resistant, thereby encouraging the average home PC’s CPU and GPU to crunch the numbers.
As mining is the process by which blockchain transactions are confirmed and the security of the entire cryptocoin community is protected, decentralized mining points to entirely new frontiers of cryptocurrency.
Coins That Encourage Decentralised Mining
Bitcoin Gold is possibly the best known of the recent “Bitcoin fork” cryptocurrencies. Essentially the Bitcoin Gold project took a picture of the BTC blockchain and created a new decentralized mining protocol based upon it. Everyone who held Bitcoin at the moment of the snapshot received a certain amount of Bitcoin Gold free of charge, and the BTG blockchain moved to a new mining system. This mining system was designed to be accessible to people who used their home computer video graphics cards, also known as GPUs. This is both more accessible and more energy efficient.
BTG had a strong initial offering, but it is too soon to know its long term potential. Bitcoin holders can contact BTG to access their crypto wallet and claim their Bitcoin Gold cryptocurrency.
Vertcoin is a nicely unpretentious coin with a good track record. It has been around since 2014 and has reaped the benefits of years of dedicated development. Vertcoin aims to be a simple cryptocurrency with a decentralized mining network. Their strong market capitalization reflects the benefits of their far-sighted development process. Of all the decentralized mining networks, this one is perhaps the most reliable as a currency.
Groestlcoin represents the opposite side of the totally independent style of decentralized crypto coinage. This coin is dedicated to those who want to mine cryptocurrencies and help to maintain a secure network with even modest computing resources. Groestlcoin uses concepts such as SegWit to maintain a small block size, allowing miners to check blocks quickly and achieve block awards with home GPUs. The wide variety of unaffiliated miners working on Groestlcoin leads to a stable, broad-based cryptocurrency. GRS has been around since 2014. They appear to represent a stable platform for investment or commerce.