The Bitcoin Reality Check: Decentralization, Politics, and Hidden Risks | by Bbinfosec | The Capital | Jan, 2025

It’s been a long time since I wrote a blog on this forum, recently myself and one of my close friends SyntheticBear who doesn’t want to disclose the details discussed in some random chitchat session during evening snack time, I thought it might be useful whomsoever reading it.

Internal note: This is not a whistleblower article or anything to scare article. We just wanted to highlight the complete stuff we learnt so it will be useful for someone at some point in time. [Hopefully, the article won’t be deleted]

Bitcoin was created to fix the broken financial system, but over time, centralized forces, politics, and manipulation have influenced its trajectory. Here’s a deep dive into Bitcoin’s contradictions, strengths, and vulnerabilities.

• Banks lend out more money than they actually have.
• The 2008 financial crash happened due to this system, creating money out of thin air.
• Bitcoin was created to solve this problem → A fixed supply, no middlemen.

🚨 Irony? Crypto exchanges & lending platforms are doing the same thing!

• They lend BTC that doesn’t exist.
• Every 4–6 years, exchanges collapse because people try to withdraw more BTC than they actually hold.
• Examples: Mt. Gox (2014), Bitfinex (2018), Terra/Luna (2022), FTX (2022).
• This forces massive sell-offs, causing BTC crashes.

💡 Bitcoin is not the problem, but centralized platforms recreate old banking mistakes.

• Some developers wanted to increase block size for more transactions.
• Others (BTC Core) refused, saying it would lead to centralization.
• This caused a hard fork → Bitcoin Cash (BCH) was born.

🚨 Did BTC devs suppress the idea?[might be false too]

• Some say big players like Blockstream influenced the decision.
• Larger blocks = More on-chain transactions = Less demand for Lightning Network.
• If BTC had tested even a 2x or 4x block size increase, things would be different today.

💡 The block size cap limits Bitcoin’s on-chain capabilities, forcing people onto alternative Layer 2 solutions.

Bitcoin was designed to be decentralized, but mining is now controlled by large corporations.

• Early BTC mining → CPU & GPU possible
• Now → ASIC machines dominate, making solo mining impossible
• Few big players control BTC mining → Foundry, AntPool, F2Pool, Binance Pool, etc.
• Mining is already centralized, but block size is still small? Why the double standard?

🚨 If ASIC centralization is acceptable, why not scale nodes with larger blocks and pruning?

💡 BTC’s original vision of “anyone can mine” is gone, but nodes remain decentralized.

• If mining is centralized, a government or corporate entity could take control.
• A 51% attack is possible, but hasn’t happened yet.
• BTC’s security depends on its miners, but also on the incentives to behave.
• If a mining pool gains too much power, nodes can reject bad blocks.

🚨 BTC is resistant but not invincible. State-level attacks could disrupt its ecosystem.

💡 BTC’s survival depends on miners staying honest and incentives remaining strong.

It’s not that a 51% attack is not possible but the community can initiate a user-activated soft fork to mitigate it. That was Satoshi’s genius not being dependent on just miners. By forking the chain

• Centralized exchanges don’t hold all the BTC they claim.
• When withdrawals exceed their reserves, they collapse.
• This has happened repeatedly and caused market-wide panic.

🚨 Fractional Reserve Banking is being recreated in crypto.

• Leverage and synthetic BTC create an illusion of supply.
• When people panic, the system collapses every 4–6 years.
• This is not BTC’s fault but an issue of centralized custody.

💡 Not your keys, not your Bitcoin! Self-custody is the only real way to own BTC.

• BTC was meant to be “peer-to-peer digital cash,” but now it’s marketed as “digital gold.”
• Exchanges, miners, and big companies now influence its direction.
• Governments can regulate on/off ramps, restricting financial freedom.
• If BTC were truly free, block size experiments would have been allowed.

🚨 Is BTC a tool for freedom or a controlled simulation?

• If big players suppress block size increases, what else can they suppress?
• If exchanges can create synthetic BTC, is its scarcity real?
• If regulations dictate access, is BTC truly unstoppable?

💡 Bitcoin is decentralized, but external forces (exchanges, devs, regulators) limit its potential.

✅ BTC is still the most secure and battle-tested cryptocurrency.
✅ BTC’s fixed supply and decentralization make it unique.
✅ BTC is not the problem; centralized control around it is.

BUT…

❌ BTC’s development is controlled by a few influential players.
❌ Scaling solutions are being artificially limited.
❌ Synthetic BTC supply via exchanges increases the risk of crashes.

💭 What’s the Future?

• BTC will likely survive, but with strong external influences.
• Alternative chains (BCH, Monero, etc.) are exploring different approaches.
• If BTC is truly decentralized, it must allow open discussions on scaling and improvements.

Bitcoin was created to fight against the flaws of traditional finance. But human greed has found ways to recreate those same flaws within the crypto ecosystem.

• BTC’s code remains pure, but the system around it is flawed.
• Exchanges & custodians create a synthetic BTC supply.
• Political influences limit BTC’s potential.
• Decentralization is being tested by big players.

👉 Will BTC remain truly free? Or will centralized forces shape its future? 🔥

Let me know your thoughts in the comments below! 🚀