The most seductive promise of Bitcoin was "democratization."
We were told that the old financial system was rigged by elites and that cryptocurrency would give power back to the people. It was supposed to be the currency of the internet—owned by everyone, controlled by no one.
But after 15 years, the data tells a very different story. Instead of reducing wealth inequality, Bitcoin has escalated it to levels that even the Wall Street seems relatively more democratic.
As an engineer, allow me to show you the reality of who actually controls the costliest cryptocurrency.
The "2%" Reality
In the United States—often criticized for its extreme inequality—the top 1% of households hold over 30% of the wealth.
In the Bitcoin ecosystem, the concentration is staggering. Just 0.26% of Bitcoin addresses own over 82% of all Bitcoin, with the founder Satoshi Nakamoto being the richest entity to date.
Some of these wallets are owned by crypto exchanges and the Bitcoin ETFs. And, as I've discussed in a previous post, the centralized exchanges own the cryptocurrencies of their users, because they own the private keys to users' exchange wallets, not the users.
In simple words, the promise of bitcoin being "people's currency" is a lie. It is a plutocracy where a tiny minority of early adopters, industrial miners, and exchanges hold the vast majority of the supply. If Bitcoin were a country, it would have a wealth gap wider than North Korea.
The Mining Monopoly
The days when Bitcoin miners were tech-savvy individuals running computers in their basements ended roughly 15 years ago.
Today, mining is an industrial monopoly. It is dominated by massive "mining pools" that mainly combine the computing power of warehouses full of specialized hardware.
The centralization is drastic and staggering:
Top 3 Pools: Just three mining pools, Foundry USA, AntPool, and SpiderPool control more than 50% of the global mining power. To hide this, the popular site site blockchain.com places Foundry USA, the largest mining pool, among the unknown miners.
Top 10 Pools: Control over 80% of the network.
This means a small group of corporate entities effectively controls the security and processing of the entire network.
The "Gatekeepers"
Bitcoin promised to eliminate middlemen. "Be your own bank," they said.
Yet, the reality is that, except for stablecoins, over 90% of all cryptocurrency activity takes place on crypto exchanges. In other words, less than 10% of crypto is used for economic purposes.
Centralized exchanges, which control roughly 90% of all trading volume, are simply unregulated banks. They are in-charge of your private keys. This means, just like regular banks, they too can freeze your accounts whenever they choose. Just like FTX and many exchanges worldwide, they can steal your money, or get hacked. This means, these "digital bankers" or some hackers in a remote country like North Korea, can steal your money.
When such events occur, users can't do much to protect their interests. They're too helpless to take any action. And their money is often lost forever.
So, if you ever buy Bitcoin on a centralized exchange, remember this: You don't really own that Bitcoin as long as it's stored in the exchange wallet. What you have, is an "I-owe-you (IOU)" receipt from an uninsured company that might not exist tomorrow.
The crypto community literally rallies behind the slogan "No Middlemen." The truth is, middlemen also exist in crypto, they just changed clothes. Now, they’re much less regulated, and hence, much more dangerous than the traditional financial institutions.
Political Capture: The Final Stage
The bitcoin wealth concentration has now translated into political power. In the 2024 US elections, the crypto industry spent around $245 million to elect friendly politicians from both parties.
The ultimate irony: What was once an "anti-establishment" currency, is now being championed by the establishment itself. Governments are proposing "Strategic Bitcoin Reserves" and political families are launching their own crypto ventures.
This isn't democratization. It is the formation of a new oligarchy that's using a complex technology to disguise the Pyramid (Ponzi) structure of bitcoin.
The Verdict
Bitcoin, and cryptocurrencies in general, have recreated the financial system they once promised to replace, only worse. The consumer protections are removed through “Your crypto, Your responsibility” philosophy, and the wealth gap in crypto has widened beyond oligarchy levels.
The "trustless" system actually requires you to trust mining pool operators, miners, unknown developers, unregulated exchanges, and more!
Don't be fooled by the revolutionary rhetoric of bitcoin. That revolution has failed a long time ago. Only its narrative changed over the years, from “peer-to-peer cash” to “digital gold” to “strategic reserve."
I'm sure you have something to add. Please let me know in the comments.
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