Most people have heard the term “Bitcoin” in passing, but how much they know about it or care about it is debatable. I think there’s still a fringe minority of direct holders who actually interact with the chain, like myself; most are using some custodian or wrapper product.
I find it surprising that despite Bitcoin reaching the level of a multi-trillion-dollar asset class, the number of people with direct ownership of Bitcoin versus the general population is likely below 2%. I thought this was a grassroots movement, retail’s chance to front-run big institutions, yet many have fumbled their opportunity, all because they couldn’t be bothered to learn or self custody.
While there is no shortage of cheerleaders dancing on the sidelines promoting the price of Bitcoin, there is a distinct shortage of players on the field, holding funds directly on-chain, running nodes to verify the network is running smoothly or producing hash rate to support block production.
The suites are starting to pay attention, dipping their toes into the market, and they find that they like Bitcoin now. They want the gains and the volatility a lot more than they did a mere four to five years ago; it’s funny what a few halvings can do to their models and underlying assumptions.
Like it or not, the landscape is transforming. The buying pressure is no longer only retail-driven.
Governments, corporations, and industrial players are quietly or loudly accumulating Bitcoin or getting involved in shares of Bitcoin-focused companies.
When an entrenched entity like BlackRock gets involved, you will always have to deal with a new round of FUD.
Oh, BlackRock controls Bitcoin.
Oh no, The US government controls Bitcoin via these proxies, like the Spot ETF, US-domiciled custodians and miners, or the funds they’ve seized in the post.
But what is control over Bitcoin?
The supply
Let’s get the obvious out of the way: Yes, large-scale institutions are hoovering up Bitcoin, and their pace of accumulation is staggering. The three deep pockets that have entered the market are:
- Government Strategic Reserves: Nations can use Bitcoin as a hedge against economic sanctions or currency instability
- Corporate Treasury Strategies: Companies treating Bitcoin as both an investment asset and a potential future currency
- Institutional Investment Funds: Large-scale accumulation through regulated investment vehicles
Countries like the United States, El Salvador, Hutan, and China have amassed significant Bitcoin reserves by hook or by crook.
Corporations such as MicroStrategy, Tesla, MetaPlanet and various financial institutions have followed suit, creating a landscape where a handful of entities can dramatically influence market dynamics.
Exchanges like Coinbase and Binance hold a sizable chunk of the known active supply of Bitcoin.
Then there are financial institutions like Blackrock, GrayScale, and Fidelity with their spot ETF products, which, despite being only a year old, have managed to accumulate over 1,000,000 Bitcoin.
| Issuer | Holdings | USD Value | Marketshare | Ticker | Fee |
|---|---|---|---|---|---|
| BlackRock | 524,474 | $53.0b | 47.2% | IBIT | 0.25% |
| Grayscale | 209,939 | $21.2b | 18.9% | GBTC | 1.50% |
| Fidelity | 208,189 | $21.0b | 18.7% | FBTC | 0.25% |
| 21Shares | 48,703 | $4.9b | 4.4% | ARKB | 0.21% |
| Bitwise | 41,394 | $4.2b | 3.7% | BITB | 0.20% |
| Grayscale Mini | 39,135 | $4.0b | 3.5% | BTC | 0.15% |
| VanEck | 13,802 | $1.4b | 1.2% | HODL | 0.25% |
| Invesco | 8,737 | $883.0m | 0.8% | BTCO | 0.25% |
| Valkyrie | 6,655 | $672.6m | 0.6% | BRRR | 0.25% |
| Franklin Templeton | 6,340 | $640.7m | 0.6% | EZBC | 0.19% |
| WisdomTree | 3,841 | $388.2m | 0.3% | BTCW | 0.30% |
If you have a problem with reality, you should have stacked harder and never sold, but does this mean Bitcoin is captured? No, Bitcoin is not a proof-of-stake network, so accumulating more supply doesn’t give you more control over the network.
But that doesn’t mean it doesn’t give you zero additional levers to pull.
Of course, if you hold more Bitcoin, you can impact the secondary markets and move the price of Bitcoin, but this doesn’t impact the chain or consensus.
The miners
What began as a peer-to-peer network of distributed miners has increasingly become a playground for powerful institutional actors. Mining is more complex than opening up a.exe file on your desktop; it’s a massively capital-intensive industrial operation.
The high operating cost drives the concentration of power and threatens to transform Bitcoin from a decentralised network into a controlled, manipulatable financial instrument.
Industrial mining has become increasingly centralised around the US, transforming what was once a distributed network into a concentrated power structure. Large investment firms can purchase ownership in these publicly traded or privately owned companies just like they can do with any industry.
It can give you the illusion of decentralisation in name only when the controlling entity could be singular.
Centralisation of Mining Power
A few key players now dominate Bitcoin mining in the US, but that doesn’t mean mining is completely centralised; many countries are mining Bitcoin with hash rates coming from all over the world.
Mining can become captured through the centralisation of mining pools. Should more entities focus their hash rate on one mining pool or mining pools that are friendly with one another, we can see a power shift.
Potential Manipulation Vectors
- Delay or block specific transactions
- Influence network governance decisions like prioritising OFAC-compliant blocks
- Implement protocol changes that benefit specific actors, like a miner-activated softfork
To have any significant impact, such as authenticating rogue transactions, the attacker would need to control a majority of the network’s computational power, commonly known as a 51% attack. The problem with a 51% attack is what the entity could achieve with it, a few double spends, and for what benefit.
Why would you sink so much money into temporarily disappointing the network? This would result in setting trillions on fire. It is not that governments aren’t opposed to doing that or acting completely illogically, but financial institutions are more bottom-line focused.
Even if it is possible, this level of control is difficult to achieve because of the sheer amount of computational power required.
The nodes
Sure, governments and large institutions could spin up thousands of sock puppet full nodes and become the majority of nodes on the network, but they still have to abide by the consensus if they decide to run a different version of the software and break away from the rest of the nodes, it could result in a chain split.
All nodes have to abide by certain rules to remain in consensus, but that doesn’t mean all nodes are of equal importance; certain economic nodes are more relevant to the network than others.
For example, large Lightning nodes like an exchange or a custodial wallet facilitate more payments than your node sitting there passively downloading blocks.
Then, there’s the support and influence around certain nodes; while we all have to abide by consensus, a node runner like Binance or large miners have outside influence if they signal for a change; they’re much more influential to the social layer of node runners than the average Umbrel or Start9 enjoyer.
Just look at all the Knots runners like myself; while we have a disdain for ordinals and don’t want them in the mempool and the chain, miners and exchanges love this crap and are willing to parse through this nonsense.
Software Ecosystem
Bitcoin software is open-source, meaning anyone can download the source code and work on it; the development of Bitcoin-related software is not immune to institutional influence. Major software development for Bitcoin and related infrastructure could be controlled by:
- Well-funded corporate entities
- Research institutions with specific agendas
- Potentially state-sponsored development teams
Attempting to take over the software
Should institutions wish to change Bitcoin, they could fund protocol development.
- Introducing features that benefit specific institutional actors
- Subtle changes that centralise network control
- Implementing “upgrades” that reduce user privacy
Alternatively, they should try to pay off certain open-source developers willing to sell their goodwill and reputation for a price to drive:
- Subtle code contributions that introduce features
- Steering development towards more controlled architectures
- Creating dependencies on centralised infrastructure
Even if a captured entity proposes a new Bitcoin client, it’s limited in its ability to get other nodes to run it; you would have to convince all the node runners to adopt this new version or soft fork of Bitcoin, which is easier said than done.
While these levels of resistance exist, it doesn’t mean institutions won’t try to pull a fast one on us.
The Path Forward: Preserving Bitcoin’s Revolutionary Potential
To counter these threats, the Bitcoin community must promote and cous on:
- More decentralised mining operations of different sizes
- Support independent and open-source software development
- Develop robust, censorship-resistant infrastructure for P2P trading
- Maintain vigilance against institutional encroachment
- Support privacy-preserving technologies
- Encourage broader, more distributed ownership, especially in the form of self-custody
- Educating users about potential centralisation risks
Will We See Another Fork War?
Is a hard fork possible? Yes, is it likely? At this point, I don’t think so; the economic uncertainty it would drive would hurt their bottom line, and it is a risk these entities are willing to take after pouring billions into the ecosystem.
By buying Bitcoin, you’re agreeing to the rules, and if you want a rule change, you’re better off selling your Bitcoin and moving to an alternative chain like the altcoins have done and failed at miserably.
For another fork of Bitcoin to occur, the community would have to significantly disagree about changes to the consensus rules or other aspects of the system.
Forks typically arise from differences in opinion on technical upgrades or ideological differences regarding Bitcoin’s future direction. If large institutions push for a new fork, it would follow a process similar to past forks, involving several stages:
- Software Fork: Developers create an alternative implementation with modified consensus rules.
- Network Adoption: A certain percentage of miners, wallets, and nodes must adopt the new software for the fork to take effect. If these entities support the new rules, they will begin mining and validating transactions based on those rules.
- Network Fork: Nodes running the new rules will begin to diverge from those that do not, leading to a network split where old nodes remain connected to their peers and new nodes connect with theirs.
- Chain Fork: Once a block is mined under the new rules, the blockchain itself forks, resulting in two separate chains—one following the original rules and one following the new ones.
Ultimately, the success and recognition of a new fork depend on adoption by the community, which includes miners, developers, and users. Let’s say the hard fork goes through, and everyone with on-chain Bitcoin can claim their forked chain Bitcoin; these holders will have to decide whether they should keep both or sell one to buy the other.
Yes, governments and institutions have deeper pockets, but if the wider world rejects their version of Bitcoin, their chain and coin will trend towards zero over time.
Remember Bitcoin Cash or B-Cash?
Key Moments in Bitcoin History
We’re entering a new phase of adoption, and a different class of holders is joining the ecosystem, one that will need to be kept in check. The promise of a decentralised, sovereign financial system must be preserved by the very institutional powers it was designed to challenge.
Whether the cryptocurrency can maintain its revolutionary potential depends on the collective action of its community.
Just because big boys step into the ring doesn’t mean they can box or bully us around. Bitcoin is money for enemies; everyone can purchase it, but the battle for Bitcoin’s soul is ongoing – and the stakes only get higher.
