Bitcoin's decentralized consensus system is the key to understanding how it can be secure without anyone in particular having to verify every transaction. In the same article, we've discussed the particulars of the Byzantine Generals' problem and how Bitcoin solved this classic dilemma when applied to digital currencies.
Here we will discuss what controlling Bitcoin would mean and how decentralized the technology really is in early 2018.
The Bitcoin consensus mechanism always looks for the longest blockchain. It is assumed that the longest chain has been verified for more miners than shorter chains, therefore it must be the correct one. This, of course, assumes that mining power is evenly distributed. Otherwise, if hashrate were concentrated in the hands of few, a different chain could be chosen arbitrarily by that particular mining pool.
In the chart to the left we can see that Antpool, F2Pool, BTCC and BitFury together add up to more than 51% of the total Bitcoin network hashrate. This means that the network could be more decentralized than it is at this time, with more players taking up smaller slices of the total mining power.
So the "nobody controls it" statement is true to the extent that there is no single entity holding more than 51% mining power, but the level of decentralization, or lack thereof, is still a bit concerning.
In this video we learn about the importance of decentralization to overall Bitcoin security. It is a very long video, but we've set the video to the point where Alyse Killeen starts her presentation about Social Attacks on Decentralization. We recommend that you take the time to watch this presentation.
Some have taken another approach at analyzing Bitcoin decentralization. In fact it's been argued that Bitcoin is not decentralized at all. Satoshi Nakamoto intended it to be an unstructured network of peers talking to each other randomly, without any central entities. From the pie chart above we clearly see that this has not become a reality. Others argue that whales (the big investors holding tons of BTC) and centralized exchanges have also violated the idea of decentralization.
Bitcoin remains secure in the sense that individual nodes can still verify, block after block, that the overall system has not been corrupted. But these nodes no longer have the power to influence the network, since they're no longer mining transactions. True decentralization can only happen when full nodes are not only capable of verifying, but also mining new blocks. Unfortunately this is no longer the case.
We can have a high degree in confidence in the security of Bitcoin, because the blockchain is fully transparent and everyone can verify transactions on their own, in fact nodes do verify the transactions it stores on its local copy of the blockchain. Perhaps there will come a time when new algorithms will be introduced to further decentralize BTC. For instance, there is a quantum computing revolution looming in the horizon, which will require Bitcoin to adapt. During this phase it may become feasible to employ a new encryption (hashing) algorithm that may allow further decentralization and less concentration of mining power in the hands of few.