Why Bitcoin Infra Centralizes in Practice

The capital intensity of ASICs and energy costs forces miners into pools, centralizing hashpower. The top 3-5 pools consistently control >60% of the network's hash rate, creating a soft cartel.\n- Key Risk: Censorship of transactions or soft forks.\n- Key Reality: Geographic concentration in regions with cheap, often state-subsidized, energy.

Running a fully-validating node requires ~500GB+ of storage and constant bandwidth, a barrier for the average user. This creates a reliance on Simplified Payment Verification (SPV) and trusted third-party APIs like Blockchain.com or Blockstream's Esplora.\n- Key Consequence: Users trust light clients, not the chain.\n- Key Metric: Estimated <0.1% of Bitcoin holders run a full node.

Acquiring and securing Bitcoin is dominated by centralized exchanges (Coinbase, Binance) and custodians. They control fiat gateways, order books, and private keys for millions of users. Even Layer 2 solutions like the Lightning Network rely on centralized liquidity hubs.\n- Key Problem: 'Not your keys, not your coins' is the default for most.\n- Key Pressure: Regulatory compliance (KYC/AML) inherently centralizes access.

Core development, major wallet software, and critical BIPs are overwhelmingly influenced by a handful of entities: Blockstream, Lightning Labs, Chaincode Labs. Dependence on centralized Bitcoin Core GitHub repositories and a small group of maintainers creates a single point of failure for innovation and security.\n- Key Risk: Governance by a technical elite.\n- Key Reality: Alternative node implementations (e.g., Btcd) have negligible market share.

Bitcoin's simple scripting language and lack of a mempool for complex transactions pushes MEV extraction off-chain, centralizing it with a few large players.\n- Block builders like Ocean and Luxor control transaction ordering for protocols like BitVM and RGB.\n- Centralized exchanges dominate BTC-denominated DeFi, acting as the primary liquidity hubs and arbitrage venues.\n- This creates a single point of failure and rent extraction that contradicts Bitcoin's decentralized ethos.

The resource cost of running a Bitcoin full node is rising, threatening network validation decentralization.\n- Blockchain size is ~550GB+ and growing ~50GB/year.\n- Initial Block Download (IBD) time can take days on consumer hardware, deterring new participants.\n- This pushes users towards light clients (like those in Stacks or Liquid ecosystems) that rely on trusted, centralized servers for block headers, creating a hierarchy.

Moving BTC onto L2s or sidechains almost always requires trusting a centralized federation or custodian, creating systemic risk.\n- Wrapped BTC (WBTC) is controlled by a BitGo-led multi-sig.\n- Liquid Network and Rootstock (RSK) rely on federations of known entities.\n- Newer BitVM-based bridges promise trust-minimization but are nascent and complex, leaving custodial solutions like Multibit and Merlin Chain with dominant TVL.

Proof-of-Work mining is economically centralized into a handful of large pools, creating potential censorship vectors.\n- Top 4 mining pools (Foundry, AntPool, etc.) consistently control >50% of the network hash rate.\n- Geopolitical risk is concentrated, with a significant hash rate located in specific jurisdictions.\n- While miners cannot alter rules, they can censor transactions or orphan blocks, a power leveraged in political debates like Ordinals and Taproot activation.