Bitcoin's Big Bluff: 3 companies control super majority of bitcoin transactions-- 2 of them from the PRC

Bitcoin advocates promise they are building an alternative democratically decentralized financial system. The reality is that bitcoin transactions are controlled by a small number of companies mostly based in the authoritarian People’s Republic of China. Bitcoin is neither decentralized nor democratic.

Let's say you own a bitcoin and were actually able to find something you could buy with a bitcoin. There are two ways you can spend your bitcoin. The first way is that you could pay a bitcoin miner to process your transaction on the bitcoin public account spreadsheet they like to call "the blockchain" to make it sound more high tech. The second way is that you could transfer your bitcoin to a centralized crypto exchange like the well-known fraudulent exchange FTX, where you could trade it for cash, and then transfer the cash to bank account and buy what you want with dollars. 

In the first scenario, the bitcoin miner processes the transaction. When a miner wins the guessing game competition they deceptively call "mining" or "proof of work," they also win the right to process the next batch of bitcoin transactions for which they get to charge transaction fees.

But there must be hundreds or thousands of miners around the world, right? Well, yes and no. Bitcoin mining is actually controlled by a very small number of companies called "mining pools," Because the odds of winning bitcoin competitions is small and unpredictable over the short term, owners of the miner pool their computer guessing power effectively turning over control of their miners to the company running the pool. 

An easy way to think of it is that the mining pool company is the general contractor, and the miners are subcontractors. For example, 18,000+ specialized bitcoin mining computers at the Allrise/Bitmain facility in Usk actually mines for the Bitmain-owned Antpool. Antpool controls the mining, and in return every day it sends Cascade Digital Mining (the joint venture LLC between Allrise and Bitmain) a check for their share of the pool's total earnings for the day (minus a large fee for being a part of the pool). The important point is that the mining pool company controls the bitcoin transactions, not the individual miners. And there are a very small number of those companies.

Globally over the last 24 hours, miners have won a total of 150 bitcoin mining competitions (they receive 6.25 bitcoin for each win). 140 of these 150 competitions were won by just seven companies. Three of these seven (Antpool, ViaBTC, BTC.com) are owned by Beijing's Bitmain and two others (F2Pool, Poolin) are also based in the People's Republic of China leaving only two not under the PRC control. 

In the second scenario, you effectively move your bitcoin off of the public spreadsheet "blockchain" and onto a private spreadsheet managed by a centralized exchange were the exchange internally processes transactions without the need for bitcoin miners (technically you give the exchange ownership of your bitcoin). Centralized exchanges are even more centralized than mining pools. Binance, the largest exchange, is nine times larger than its next largest rival, US-based Coinbase (although Coinbase has indicated it may be departing the US due to regulatory crackdown on illegal securities). Binance currently manages around $10 billion of bitcoin. 

Recently both the Wall Street Journal and Financial Times have published front-page stories exposing Binance's attempts to hide its deep connections with the PRC. The WSJ story "Texts From Crypto Giant Binance Reveal Plan to Elude US Authorities." According to the WSJ, Binance was largely running its US exchange from China while lying to US authorities. See Texts From Crypto Giant Binance Reveal Plan to Elude U.S. Authorities - WSJ

According to the Financial Times, "Binance hid substantial links to China for several years, contradicting executives’ claims that the crypto exchange left the country after a clampdown on the industry in late 2017, according to internal company documents seen by the Financial Times.

"Chief executive Changpeng Zhao and others holding senior positions repeatedly instructed Binance employees to hide the company’s Chinese presence. " See Binance hid extensive links to China for several years | Financial Times (ft.com)

Control of bitcoin mining and bitcoin transactions is highly centralized, and it's centralized in the PRC.  Under the PRC's national security law, all citizens and corporations are required to act as agents under the direction of the Chinese Communist Party. Bitcoin is not the future we should be looking for.