Buho Trading

I don't want to FUD, but it’s alarming.
I’m not trying to discourage you from holding BTC, it’s the only asset I hold for the very long term (8+ years).
But I just discovered a major risk that every holder should know.
As you know, Bitcoin’s main strength must lie in its decentralization, but we're far from it!
We don’t care about $BTC distribution; what matters is how decentralized the network’s computing power is.
The key is to avoid a single actor gaining more than 51% of the network’s total hashrate. That’s what we call the 51% attack risk, and it’s the biggest threat to Bitcoin.

By analyzing the Coinbase transaction (the first transaction in every block), we can track who controls what part of the Bitcoin network.
The miner inserts it and usually contains a unique tag that identifies the pool.
This makes it easy to see which pool mined the block.

For example, Antpool uses the tag /AntPool/.
By collecting this data, we can easily follow the share of blocks mined by each major pool.
Results are scary: the top 5 mining pools mine over 80% of all blocks, meaning they control more than 80% of Bitcoin’s total hashrate.

We can also measure centralization over time using the Mining Centralization Index, which shows how much hashrate is held by the top 2 to 6 pools.
Satoshi envisioned a Bitcoin that would become more decentralized over time as adoption grew, but the opposite is happening.

What’s even more concerning is that some smaller pools seem to use identical block templates to larger ones, suggesting the existence of proxy pools.
For example, while Antpool officially holds around 20% of the network, its proxy pools push that number up to 30%.

Just by including Antpool and its proxies, the mining centralization index jumps from 85% to 96% of the hashrate being controlled by the top 6 pools.
And that’s without even counting potential proxies for other major pools.

Bitcoin has gone through phases of better decentralization, like in 2017 or between 2017 and 2022. But since 2023, it’s become increasingly centralized.
That timing lines up closely with the beginning of Bitcoin ETF developments, probably not a coincidence.

Among the top 5 mining pools, 2 are based in the US and 3 in China.
+ US: Foundry and MARA Pool
+ China: Antpool, ViaBTC, and F2Pool
That means the US controls over 40% of the Bitcoin network, and China 55%, with just 5 pools.
It’s insane when you think about it.

In theory, these pools have no incentive to attack the network since their business depends on Bitcoin’s success.
But don’t forget, these are regulated companies. Their respective governments can pressure them to change things on the network if they want to.

Back in December, there was an incident where a transaction was censored in a block mined by F2Pool.

It’s hard to say whether this was intentional (e.g. sanction enforcement) or just a coincidence, but Bitcoin core developer Peter Todd doesn’t rule out censorship as a possibility.

But as I always say, every problem has a solution.
Making Bitcoin more decentralized is a tough battle, a true David vs Goliath situation.
Here’s what we can do:
+ Support smaller mining pools
+ Encourage large miners to go solo
+ Redirect hashrate to decentralized pools
+ Promote home mining, even on a small scale
#BTCvsMarkets

I don't want to FUD, but it’s alarming.
I’m not trying to discourage you from holding BTC, it’s the only asset I hold for the very long term (8+ years).
But I just discovered a major risk that every holder should know.
As you know, Bitcoin’s main strength must lie in its decentralization, but we're far from it!
We don’t care about $BTC distribution; what matters is how decentralized the network’s computing power is.
The key is to avoid a single actor gaining more than 51% of the network’s total hashrate. That’s what we call the 51% attack risk, and it’s the biggest threat to Bitcoin.

By analyzing the Coinbase transaction (the first transaction in every block), we can track who controls what part of the Bitcoin network.
The miner inserts it and usually contains a unique tag that identifies the pool.
This makes it easy to see which pool mined the block.

For example, Antpool uses the tag /AntPool/.
By collecting this data, we can easily follow the share of blocks mined by each major pool.
Results are scary: the top 5 mining pools mine over 80% of all blocks, meaning they control more than 80% of Bitcoin’s total hashrate.

We can also measure centralization over time using the Mining Centralization Index, which shows how much hashrate is held by the top 2 to 6 pools.
Satoshi envisioned a Bitcoin that would become more decentralized over time as adoption grew, but the opposite is happening.

What’s even more concerning is that some smaller pools seem to use identical block templates to larger ones, suggesting the existence of proxy pools.
For example, while Antpool officially holds around 20% of the network, its proxy pools push that number up to 30%.

Just by including Antpool and its proxies, the mining centralization index jumps from 85% to 96% of the hashrate being controlled by the top 6 pools.
And that’s without even counting potential proxies for other major pools.

Bitcoin has gone through phases of better decentralization, like in 2017 or between 2017 and 2022. But since 2023, it’s become increasingly centralized.
That timing lines up closely with the beginning of Bitcoin ETF developments, probably not a coincidence.

Among the top 5 mining pools, 2 are based in the US and 3 in China.
+ US: Foundry and MARA Pool
+ China: Antpool, ViaBTC, and F2Pool
That means the US controls over 40% of the Bitcoin network, and China 55%, with just 5 pools.
It’s insane when you think about it.

In theory, these pools have no incentive to attack the network since their business depends on Bitcoin’s success.
But don’t forget, these are regulated companies. Their respective governments can pressure them to change things on the network if they want to.

Back in December, there was an incident where a transaction was censored in a block mined by F2Pool.

It’s hard to say whether this was intentional (e.g. sanction enforcement) or just a coincidence, but Bitcoin core developer Peter Todd doesn’t rule out censorship as a possibility.

But as I always say, every problem has a solution.
Making Bitcoin more decentralized is a tough battle, a true David vs Goliath situation.
Here’s what we can do:
+ Support smaller mining pools
+ Encourage large miners to go solo
+ Redirect hashrate to decentralized pools
+ Promote home mining, even on a small scale
#BTCvsMarkets