This is a misconception about cryptocurrencies such as Bitcoin or Ethereum. Both are highly centeralized, in the hands of a tiny oligarchical ownership along with a small group of mining warehouses.
And they are likely going to get more centralized over time. The smaller currencies, outside of the top 10, are now all likely vulnerable to 51% attacks. I wouldn't be surprised if that grows to include any outside of the top 5 soon.
It looks like this is how smaller currencies die, they are vulnerable at any time to 51% attacks thus no one wants to use them. At least in the traditional banking system if you had a lot of money you could manipulate exchange rates, but you couldn't just outright steal when you had extreme market power.
The case of coins that optimise for consumer/general purpose hardware (by employing PoW algorithms suited for CPUs, or explicitely switching algorithms periodically) is interesting in this context.
Traditional cloud platform providers are also in a position to impact mining on those. I doubt that any coin could cope with those warehouses of potential mining power.
I'm looking closely at monero on this subject. Despite or because of their hardcore emphasis on privacy, that project has made interesting decisions regarding how to deal with potentially hostile miners.
Disclaimer: Yep, you guessed it, I hold coins, and monero is among them. I'm not saying buy XMR, but definitely take a look at their "politics".
I think it's only postponing the inevitable. If any cryptocoin manages to become "the new dollar" the incentives to micro-optimize the mining will be tremendous. Even assuming that they manage to create an algo (or change it often enough) to make custom ASIC pointless it just means that it's CPU vendors who have the edge. Intel, AMD and friends could sell their first batches of new and improved CPUs for a primer during the first months. And it's even less risky for them than for cryptocurrency ASIC vendors because CPUs don't immediately become useless if they can't be used to mine cryptocurrency. It's just a bonus.
On top of that even if a cryptocurrency manages somehow to completely level the playing field when it comes to mining hardware you still have significant differences when it comes to cost of electricity. Bitmain will stop building ASICs and start building hydroelectric dams instead.
I can't see how you can imagine a future where cryptocurrencies are successful and it's still worthwhile for individuals to mine in their basements. There's always be economies of scale that'll favor the cartels.
Beyond that it might even be possible that PoW algorithms designed to run on general purpose CPUs can end up giving more power to the cartel than an ASIC optimized algorithm because in the latter case the network consensus can decide to hard fork and change the PoW algorithm, hurting immensely the ASIC vendors and their users. That gives leverage. Similarly a new cryptocurrency or minority fork can protect itself from a 51% attack by changing the PoW algorithm, making highly-optimized mining farms unable to attack the coin (Bitcoin Gold should probably have considered that).
Meanwhile if everybody uses general-purpose server farms to mine then they can easily be repurposed to attack any small coin, making sure that the coin they favor remains dominant.
I think you're missing some context on the difference between CPUs and ASICs in terms of PoW algo design and hardware cost&distribution.
Again with monero because it's pertinent to your point, I would encourage you to read up on its design goals, and the discussions around the recent PoW algo change on github or Reddit.
Monero changing its mining algorithm doesn't change how most of the supply was produced and given away nearly for free to the dev team and early users.
The math behind it equates to existing capital wealth being used to generate the supply which is amplified by several magnitude for the first users to show up and run the software. Future production costs increase, and the relative newly produced supply decreases.
Old users rely on the gullibility of new users to exchange real world value for these easy to produce database-tokens.
Decentralization does not mean owned by everybody, it means owned by nobody.
For instance imagine we had a mine that was effectively infinitely large (for the sake of the analogy). If we allowed absolutely anybody with a pickaxe to to come in and mine it, we might call it decentralized. Nobody would own the mine. That one group sent a million miners to go mine it would not suddenly make them owners, even if they happened to receive the largest benefit from the it. By contrast centralization would be when one individual or group forcefully stops, generally with government support, any other individual from mining in "their" mine. In this case they would indeed own the mine. In the case of Bitcoin there is absolutely and literally nothing stopping from somebody from starting up a mass mining farm becoming the new plurality beneficiary.
Due to centralization of hardware the Chinese government can trivially do a 51% attack. That's a form of centralization your ignoring due to an overly specific definition.
The tiny block size is arguably an ongoing 51% attack from an oligarchy that is in collusion. Again, depending on what you consider centralization having a tiny group that's in direct communication easily qualifies.
Pas: In your example if the only option is to use picks from one company or your hands because other tools are confiscated at the enterance then it's very centralized.
51% attacks are mostly overblown. If a group decides to engage in a 51% attack, all they are doing is effectively revoking their own license to print money - which is what having a > 51% mining capacity in a major crypto translates to. Bitcoin is a public ledger and double spend transactions would be completely visible to all. All this means is that the coin would end up getting forked, similar to what happened when Ethereum screwed up - and it continued on with minimal fanfare. And in that case their screw up was of their own fault instead of something inherent - even fewer people would be inclined to stay on a Bitcoin line that has been 51%'d.
Rolling with the mine analogy, a 51% attack is equivalent our group that sent in a million miners changing the diamond mine into a 'glass' one. It becomes fake, and loses nearly all of its value and people move to the new 'real' mine. You do nothing except critically hurt yourself.
This assumes the entity wants Bitcoin to survive. The Chinease government has zero intrest in keeping Bitcoin alive and would happily kill it off.
Forks don't help with 51% attacks as the attacker can continue to use their hardware on the fork. Further, you can use a proxy to hid the origin of a block, so Bitcoin would need to move to a new hash which would take a long time and prevent any obvious successor.
I was making the assumption that the entity wants to kill the coin. Doing a 51% attack out of greed makes no sense as it'd be immediately self defeating, at least on a mainstay coin.
There are numerous different hashes with varying levels of ASIC 'resistance' - yeah it's a cat and mouse game, but hardly a major issue. The 'obvious' successor would be a matter of the unpredictable public as I'm certain numerous entities would vie to become e.g. Bitcoin 2.0. In the end the market would decide which was the winner. The great thing about it all being that the users could actually come out net winners in the end as the successors would likely not only be technical superior, but it would also be able to use the exact same ledger (as with Bitcoin cash for instance) so that you start with the same relative share in it as you did with the original.
In a way it would even be a good thing as Bitcoin itself is increasingly dated technologically, but is dominant because of its market positioning - which makes it difficult to change. If its market positioning was damaged, we could see the rise of an improved successor.
Take a freshly baked pie, and give half of it away for a suggested donation of $1 USD to the first 10 people who show up.
Now split the last half of the pie into smaller chunks and slowly give out bread crumbs to new "miners" with the requirement they spend large amounts of capital on exceedingly inefficient number guessing machines in order to win the lottery of "mining" more crumbs.
Satoshi Nakamoto
Thu Jan 8 14:27:40 EST 2009
I made the proof-of-work difficulty ridiculously easy to
start with, so for a little while in the beginning a
typical PC will be able to generate coins in just a few
hours. It'll get a lot harder when competition makes the
automatic adjustment drive up the difficulty.
first 4 years: 10,500,000 coins
next 4 years: 5,250,000 coins
next 4 years: 2,625,000 coins
next 4 years: 1,312,500 coins
The 10,000 BTC pizza is a case study in how Satoshi designed the supply to rapidly dump very cheaply before other users were able to discover the network, by that time and later new users not only need to spend more to mine but less coins are produced for a correct lottery number.
In economics, the Gini coefficient is the standard measure
of how inequitable a society is. This is tricky to
determine for Bitcoin, as it's not quiet a "society" in
the Gini sense, one person may have multiple addresses and
many addresses have been used only once or a few times.
(The commonly-cited figure of 0.88 is based on one small
exchange in 2011.) However, a Citigroup analysis from
early 2014 notes: "47 individuals hold about 30 percent,
another 900 a further 20 percent, the next 10,000 about
25% and another million about 20%"; and distribution
"looks much like the distribution of wealth in North Korea
and makes China's and even the US' wealth distribution
look like that of a workers' paradise
Dorit Ron and Adi Shamir found in a 2012 study that only
22% of then-existing Bitcoins were in circulation at all,
there were a total of 75 active users or businesses with
any kind of volume, one (unidentified) user owned a
quarter of all Bitcoins in existence, and one large owner
was trying to hide their pile by moving it around in
thousands of smaller transactions. (Shamir is one of the
most renowned cryptographers in the world and the "S" in
"RSA encryption")"
Ethereum:
Presale ICO / Premine ( max cost $0.50 USD per ETH )
= 72,009,990 ETH
Total Supply today (Feb 23rd 2018)
= 97,800,000 ETH
Source:
https://etherscan.io/stat/supply
https://news.earn.com/quantifying-decentralization-e39db233c...