Study Shows Bitcoin Is More Centralized Than Ethereum

Here is the paradox, the study from this article claims that “Ethereum is more decentralized than Bitcoin” at the London, Genesis Conference.  Then another study quoted by Coindesk from a Caribbean conference says that “Ethereum is more centralized than Bitcoin“.  How can two set of stats say the opposite, what is going on?

It’s quite simple if you’re familiar with IT, networks, banking and coding.  It’s another to put it into perspective and it also depends on your views overall in business and IT.

The first article that says Ethereum is more decentralized, I believe is correct.  It is simply taking into account, known factors, variables and actors.  To this end, it is blatantly clear that there are massive Bitcoin mining farms by major players, more so than Ethereum it appears.  Of course, mining is just one aspect of centralization.  There are also some that just run “nodes” which are not mining.  It is not entirely clear from the article if a differentiation was made between the two (mining vs node runners).  Reading the article, however, it does seem to be a bit biased towards Ethereum and perhaps this is why the context in my opinion is completely missing.  It should be remembered that on that note, Ethereum’s whitepaper itself seems to indicate that centralization of nodes is imminent as small players will not have the CPU, memory and HDD resources to run full nodes for much longer as the blockchain grows.  To make it even worse in a more practical sense, geth/Ethereum can bring most computers to a crawl and a halt, whereas I can run a full Bitcoin or Litecoin wallet without breaking a sweat.  One factor I think Bitcoin in terms of mining at least is more centralized is because of ASIC mining, which Ethereum doesn’t have (although Bitmain is shipping Ethash miners soon).  I think this will change fairly quickly once Bitmain ships.  In fact I could sync the whole Bitcoin chain without a hitch than I could Ethereum.  The article also boasts that Ethereum could process thousands of transactions per second, however this is not in the real-world or implemented yet and the switch to PoS has been indefinitely delayed.  Currently Ethereum processes a meager and insufficient 15 transactions a second.

Then there is the second article which looked at centralization from another aspect. It found that 20% of code in the Ethereum commits was made by a single person, vs 7% on the Bitcoin codebase.  They are implying that a form of centralization is through the developers who create the code.  This is also true in my opinion but we should understand from a practical point that all coins are centralized from the beginning and some will inevitably become more centralized in a “bad way” in the future.  This is especially true for minable coins, it is a game today of who can buy enough hardware or hashing power, and they essentially control the network.  This is true of Ethereum and Bitcoin.

Let’s keep this in context, all coins by definition start out “centralized”.  Bitcoin was initially 100% centralized under Satoshi since him or his group created the entire codebase and ran the entire network initially.  For a time it wasn’t a bad thing at all, Bitcoin has proven fairly reliable, resilient over the years.  However, the bad part is that whoever runs the most full nodes and whoever has the most hashing power has defacto control of the network.  In general this means big corporate and government players control Bitcoin and may soon control it entirely.  Centralization under Satoshi was undoubtedly good and acceptable, but the path today is clearly “the bad way”.

At the end of the day all projects in IT are centralized to a certain degree.  With the first article above, noting that most cryptocurrencies are essentially centralized or will be soon, this shouldn’t be surprise.  Now it is a matter of what the community does and how we adapt.  Should we centralize ourselves in a good way so no bad actors can do what is happening to Bitcoin and Ethereum or should we wait like ducks in a barrel for the big players to fully centralize and control cryptocurrency?