Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Bitcoin has risen as a major player in the crypto world. It is a huge chain that supports millions of users and billions of transactions. Many supporters of the project cite decentralization as a reason for adoption.
However, the project might not be as decentralized as some may say. This begs the question: Is Bitcoin actually decentralized?
Created in 2008 by the anonymous Satoshi Nakamoto, much of the hype surrounding crypto stems from Bitcoin. It was the first cryptocurrency to make a name for itself.
Bitcoin is a peer-to-peer network that operates on its own blockchain. This means that you can send Bitcoin tokens to any individual across the globe through the Bitcoin network. This is possible through the use of wallets, which are a way for individuals to store crypto.
Millions of transactions on Bitcoin’s blockchain need to be verified to prevent fraud and maintain order on the chain. Currently, Bitcoin relies on a proof of work system to verify these transactions in a decentralized way.
Proof of work is a system that uses computing power to decide which transactions are legitimate. Anyone across the globe can contribute computing power to the chain and help verify transactions. Those who contribute computing power are called “miners” and are given rewards for doing so.
Every 10 minutes, a “block” is uploaded to Bitcoin’s blockchain. The miners that verify transactions in that time frame will receive Bitcoin for compensation. This is called the block reward. All of the transactions are placed into an irreversible and immutable ledger.
Proof of work contributes to decentralization because it allows anyone with the necessary resources to contribute to the chain. There is no single entity or group that controls the chain. And, transactions can be verified by anyone across the globe. However, if 1 group controls too much power on Bitcoin’s network, it can be problematic.
A 51% attack can occur when 1 single group of miners controls more than 50% of the chain’s computing power. If 1 group controls a majority of the computing power, they can “attack” the chain. This would allow the group to stop all transactions on the chain and “double-spend” tokens. This means that they could send a coin and then reverse it without verifying it.
While a 51% attack could prove damaging, if not fatal to the Bitcoin chain, it has not happened. There is a high probability that it will never happen. This is because the energy and computing equipment required to own 51% of the Bitcoin network’s computing power is nearly impossible for a single group to attain.
However, there is some worry about mining pools going rogue and committing a 51% attack.
Mining pools are a way for miners to receive more predictable rewards for verifying transactions. Currently, 6.25 Bitcoin tokens are distributed every 10 minutes as the block reward. While this may seem like a lot, when it is distributed among miners it provides very little, if any, returns for a majority of miners.
Mining pools combine the computing power of many individuals to consistently receive block rewards. Because they take up a larger portion of the total computing power, they can receive consistent and predictable rewards. While this helps individual miners, it can detract from the decentralization of the Bitcoin network.
When you join a mining pool, you essentially give your computing power to the pool. This means that a single group can control a large portion of power on the Bitcoin chain.
If 1 pool were to ever attain 51% of the chain’s computing power, they could execute a 51% attack. Luckily, the largest pool, F2Pool, only owns around 15% of the total computing power, a far stretch from the 51% needed.
It’s also likely that miners that use pools will stop using these pools if the platform decides to attempt a 51% attack. Those who see this malicious behavior can remove themselves from the pool, lessening the proportion of computing power that pool has.
Simply put, Bitcoin is far from being the most decentralized cryptocurrency. Its mining and mining pool system allows single groups to own large portions of the computing power on the network.
Other tokens use different systems to verify transactions that promote decentralization, such as sharding and proof of stake. These systems spread power on the blockchain across many more individuals and limits the amount of power 1 group can have.
However, there are many cryptocurrencies and projects that are much more centralized than Bitcoin. Bitcoin offers a peer-to-peer network, which is something not all projects offer. It is also the largest project with ownership spread across the globe. Because of its size, it is undoubtedly decentralized, but there are some other projects that offer a higher degree of decentralization.
Bitcoin is the most popular cryptocurrency, with an average daily trading volume of over $32 billion. Because of this, it’s very easy to buy. The coin is offered on all of the major crypto brokerages.
Opening an account on a major crypto brokerage is very simple and typically only requires an email or phone number and a funding source. eToro, Webull and Coinbase are the best crypto brokers due to their simplicity, security and focus on education.
However, each broker is slightly different, so make sure to do some research to decide which exchange is the best for you.
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Disclosure: This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) and USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections and not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.
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eToro is headquartered in Cyprus, England and Israel. A major eToro plus is its social trading operations, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its underwhelming research and customer service features.
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pros
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Best For
Intermediate Traders and Investors
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Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
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cons
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Best For
Global and Active Traders
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Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
Best For
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Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.
Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.
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cons
- Higher fees than competitors
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SoFi takes a modern approach to personal finance. It recently created buzz with the release of SoFi Crypto, a way to trade cryptocurrency on the app. The platform allows investors to familiarize themselves with crypto. It offers a high level of security, great customer support and an intuitive interface. However, it does have shortcomings with the number of cryptos offered and geographic restrictions.
Best For
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- Centralization of your money
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- Charges low or no fees for some functions within the interface.
- Relies on Coinbase, a very secure platform, to process transactions.
- Presents a low barrier of entry — you only need $10 to start trading.
cons
- Currently only offers 28 coins.
In September 2021, China reiterated a ban on all cryptocurrencies. They cited the possibility of fraud for their decision. This caused many miners to leave China and pursue mining in other parts of the globe. Before the ban, about half of all computing power was concentrated in China alone.
Because the miners were forced to leave China, this allowed the computing power on the Bitcoin chain to be more evenly distributed across the globe. This furthers the decentralization of Bitcoin, as the computing power is no longer concentrated in 1 geographical location. Instead, miners are more evenly spread around the world. This limits the power and control any single country or location can have on the network.
Frequently Asked Questions
How long does it take to mine 1 Bitcoin?
1
How long does it take to mine 1 Bitcoin?
asked 2021-10-14
Caden Poke
1
On average, it takes about 10 minutes to mine 1 Bitcoin.
answer link
answered 2021-10-14
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