Decentralization Explained in One Minute: Bitcoin vs. Altcoins
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- Опубліковано 22 лют 2023
- Through this one minute animation, we will find out what decentralization in let's call it a financial sense is in the first place as well as what the ramifications are with respect to the cryptocurrency landscape.
More specifically, a meaningful understanding of what decentralization is in the first place will enable us to find answers to a wide range of questions such as:
1) How decentralized is Bitcoin itself and why?
2) What about altcoins, should they be considered as decentralized as Bitcoin?
3) What are the pros as well as cons of decentralization?
4) Is decentralization always the answer in the world of finance?
5) If not, then what are the instances where decentralized solutions such as Bitcoin make sense and when would a centralized alternative represent the superior choice?
While there are few certainties in the world of economics, it is fortunately anything but difficult to wrap your head around decentralization, especially as it pertains to the ever-so-heated Bitcoin vs. altcoins debate :)
First order of business: a huge THANK YOU to the person who reached out and selflessly provided meaningful financial help to the channel, it was literally by far the most inspirational interaction I have had since launching One Minute Economics. Made me confident that one day, I might even end up dedicating 100% of my time to doing stuff I love... not quite there yet but I could actually see it happening! If anyone else is in a position to help (only if you can genuinely afford to!), visit OneMinuteEconomics.com to check out the options that currently exist or shoot me an email at andrei@oneminuteeconomics.com and let's get in touch :)
Second order of business: my book, The Reasonable Case for Bitcoin, is available over at Amazon, Barnes & Noble, Apple Books and Kobo.
The links can be found below:
1) Amazon: www.amazon.com/Reasonable-Case-Bitcoin-Andrei-Polgar-ebook/dp/B09G6Z45QB
2) Barnes & Noble: www.barnesandnoble.com/w/the-reasonable-case-for-bitcoin-andrei-polgar/1140161918?ean=2940165646256
3) Apple Books: books.apple.com/us/book/the-reasonable-case-for-bitcoin/id1585870749
4) Kobo: www.kobo.com/ww/en/ebook/the-reasonable-case-for-bitcoin
Does this playlist cover entire basic macroeconomics?
What else is decentralized here in this reality besides Bitcoin and the planet’s resources?
Consciousness.
Where does litecoin come down in this? It is my understanding that it is decentralized same as bitcoin.
More nodes = more decentralized. LTC doesn't even come close to BTC. Not to mention network effects, market cap, adoption rates, etc.
Yes it is another decentralized network than bitcoin but a much smaller one
So Ethereum, with it's proof of stake is even less decentralized, bacause it gives more power to whales?
Very controversial issue... if I had to choose, then even after factoring in environmental concerns, I'd still go with PoW
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Whales has nothing to do with centralization because no matter the amount of Bitcoin one entity has they still have no more impact on the protocol than someone with $20 worth of Bitcoin. And the mining pool argument is flawed too as a large mining pool consists of thousands and thousands of individual miners that can leave at any point and join another mining pool or solo mine
What if a mega-whale decides to sell into an illiquid bid, bringing about a price collapse that spirals into panic and ultimately makes it unprofitable to mine? While the problem would indeed be temporary because difficulty adjustments would kick in, it still makes it clear that one cannot simply state a whale doesn't have more of an impact than someone who owns $20 worth of Bitcoin :)
@@OneMinuteEconomics That has nothing to do with centralization though. What makes Bitcoin decentralized is the amount of nodes on the protocol. One node = one vote (you get to decide what version to run). One wallet = zero votes and it doesn't matter how much is in said wallet, you still get zero votes. Wallets have no impact on the protocol whatsoever
Why limit the idea of decentralization to the protocol? Wallets have no direct impact on the protocol whatsoever, no disagreement here. What I was alluding to was that what in a perfect storm situation, mega-whales can end up representing a de facto centralized point of failure indirectly.
For example:
1) A mega-whale wants instant liquidity and market sells into super-slim bids
2) Price crashes
3) Other market participants panic and sell, leading to a vicious circle with respect to the price
4) At some point in this vicious circle, things get bad enough that miners feel the pain
5) Enough of that pain and the consequences (such as being forced to take hardware offline) can end up affecting the well-functioning of Bitcoin (even if most likely only temporarily)
Again though, not directly.
@@OneMinuteEconomics Can't effect my node and therefore not the protocol. Now you're probably going to mention 51% attacks and I don't have time to explain why that's a non issue but if you want to know check out Jimmy Song's interview with Preston Pysh. Anyway, you were wrong in your video on these two matters and I just thought I'd help and explain why so that you don't make those mistakes again
FWIW, I don't consider 51% attacks a high-probability outcome either, just wanted to point out that centralized points of failure can exist elsewhere as well
Great video , one of the most important point of decentralization is Proof of work with no premine. Proof of Work forces competition through a meritocracy where no one entity can have a monopoly as different geographies have different advantages and miners can compete on different variables. Miners are forced to sell most or all of their coins to pay for costs to secure the network and thus act more as employees to Bitcoin.The game theory and incentives of Proof of stake all lead to centralization because there is no external need to compete for energy and efficiencies. The creators or large whales who buy into the coin will all form a controlling oligopoly who can simply collect taxes (fees) for no effort and censor with no effort unlike with proof of work
You nailed it. Great post! BTC and BTC only.