Is Bitcoin decentralized & secure or is it allowed to look that way
Bitcoin is permissionless in code but permissioned in practice by choke-points that governments and large intermediaries either directly control or can cheaply coerce.
Thesis
Bitcoin is permissionless in code but permissioned in practice by choke-points that governments and large intermediaries either directly control or can cheaply coerce. It’s allowed to look decentralized/secure so long as it functions primarily as a supervised store of value and speculative asset, not a mass medium of exchange outside compliance rails.
Where the control actually lives (the quiet levers)
Bitcoin’s design is decentralized in protocol, but the real-world control surface has shifted into layers above consensus: pools, clouds, app stores, and custody perimeters. These are the quiet levers that steer usage without changing the code.
1. Mining Leverage: Power Resides in Pools, Not Farms
Hash power is coordinated by a small number of mining pools.
These pools decide which transactions go into blocks by setting templates and policies — including filters, Office of Foreign Assets Control (OFAC) lists, and template upgrades.
Individual miners chasing predictable payouts delegate that power upstream.
As a result, a regulator only needs to influence a few pool operators, not thousands of ASIC owners.
2. Template and Governance Monoculture
Bitcoin relies heavily on a single dominant client implementation (Bitcoin Core) and a small group of maintainers.
This concentration allows subtle control via mempool and relay settings — limits, filters, and propagation policies — that determine which transactions spread easily and at what cost.
Although officially labeled “local policy”, defaults tend to coordinate behavior across the network.
Most node operators do not manually adjust these parameters, which gives the defaults disproportionate influence.
3. Relay Choke-points
Fast relay networks and a small number of Domain Name System (DNS) seeds shape how blocks and transactions propagate.
Because many nodes rely on the same Internet Service Providers (ISPs) or cloud infrastructures, network-level attacks such as Border Gateway Protocol (BGP) hijacks or eclipse attacks remain realistic risks.
This centralization narrows true independence.
4. Cloud and Node Centralization
A significant portion of reachable Bitcoin nodes are hosted on major cloud providers.
These companies can modify their acceptable-use policies (AUPs), throttle ports, or silently remove images.
Such moves create policy leverage outside the reach of Bitcoin’s own governance mechanisms.
5. App-Store and Wallet Perimeters
Most retail users interact through mobile wallets or browser extensions controlled by Apple, Google, or other platform gatekeepers.
A short AUP update can demote or delist non–KYC wallets, or require compliance prompts tied to the Financial Action Task Force (FATF) Travel Rule.
Legal bans aren’t necessary when distribution itself can be restricted by platform policy.
6. On/Off-Ramp Custody and Surveillance
Most Bitcoin flows touch regulated exchanges or custodians bound by Anti-Money-Laundering (AML) and Travel Rule obligations.
These entities enforce address blacklists, apply heuristic “taint” analysis, and freeze funds on suspicion — gradually pushing users toward paper exposure (ETFs, futures, custodial “accounts”) rather than true self-custody.
7. Paperization as a Throttle
Exchange-traded funds (ETFs), futures, and structured notes create synthetic exposure to Bitcoin that absorbs investor demand while keeping custody centralized.
This “paper Bitcoin” channels governance through brokers, clearinghouses (like the Depository Trust & Clearing Corporation), and custodians.
Price discovery becomes driven by basis and borrow costs, not by organic on-chain demand for unspent transaction outputs (UTXOs).
8. Tax and Regulatory Friction on Payments
Treating small Bitcoin transactions as taxable events, enforcing KYC at point of sale, and pressuring payment processors have turned Bitcoin’s medium-of-exchange (MoE) use case into a compliance burden.
Consumers naturally revert to stablecoins or cards.
Bitcoin remains a Store-of-Value (SoV), but its payments role withers.
9. Sanctions and Blacklists via Pools and Major Services
Mining pools under insurer or exchange pressure may adopt “compliant templates” that delay or exclude certain UTXOs.
Outright censorship isn’t required — latency penalties and higher transaction costs can shape user behavior just as effectively.
10. Lightning Network Centralization
While the Lightning Network (LN) enables fast transactions, liquidity is heavily concentrated around large hubs and custodial wallets.
These hubs are easy to regulate, bank, or deplatform.
The result: “Fast Bitcoin” becomes fast, supervised Bitcoin.
11. Fee-Market Steerability
Mempool/policy defaults (datacarrier norms, package relay, ancestor/descendant limits) and state-sponsored spam bursts can crowd out small payments and reshape fees. The network remains “alive”, but retail utility erodes.
12. Narrative Governance
Words like “security”, “child protection”, “sanctions compliance”, and “quantum readiness” provide moral cover for tightening control over all the above perimeters.
The code remains “open” and “free”, but usage becomes steered toward monitored, compliant channels.
Revealed Preference: What the System Actually Does
Expansion of KYC/AML regimes under the Travel Rule throttles Bitcoin’s use as a medium of exchange.
Approval of spot and futures ETFs increases paper share, lowers volatility, and shifts governance into regulated wrappers.
Banking and app-store friction discourages non-custodial use, entrenching custody defaults.
Periodic “compliant mining” trials demonstrate enforcement feasibility, even when later rolled back (e.g. MARA, F2Pool).
I’ve already written more about this in the following article:
Why this System persists (incentive math)
Governments want traceable value and programmable payments; a permissionless global currency undermines both.
Allowing Bitcoin to exist as a supervised store of value creates a release valve for savers and an attractive surveillance surface for regulators.
Total bans are expensive and ineffective, whereas soft containment — via policy perimeters — is cheap, gradual, and durable.
“But Isn’t the Protocol Still Secure?”
Yes — the core protocol remains robust against arbitrary coin creation and double-spends.
However, it is not secure against usage-level containment.
While consensus remains decentralized, the economic majority interacts through choke-points outside the protocol: custody, cloud hosting, relay networks, mining templates, and wallets.
Decentralization at the consensus layer does not automatically protect against policy-layer capture.
What True Decentralization would require
To restore meaningful sovereignty, the ecosystem would need:
Broad migration to self-custody and non-custodial payments.
Locally controlled relay infrastructure (community ISPs, mesh networks).
Home or community mining using non-pool templates.
Routine, verifiable Proof-of-Reserves across custodians.
Wallet and app-store independence.
These requirements conflict with convenience, cost, and legal comfort — so adoption remains marginal in a low Gross Consent Product, compliance-first environment.
If you’re watching for a regime shift (MoE resurgence)
Look for signs that containment is breaking:
Mining pools publicly adopt non-filtering templates and anti-censorship commitments.
App stores explicitly protect non-KYC wallets.
Payment processors allow non-KYC merchant flows at scale.
Paper share of total supply declines relative to self-custody, backed by verifiable Proof-of-Reserves.
Sustained fee relief achieved through engineering improvements, not policy throttles.
Until those indicators appear, assume we’re living in an “allowed decentralization” regime — where the protocol’s ideals remain intact, but the surrounding economy channels Bitcoin toward traceable store-of-value use, not sovereign peer-to-peer money.
Bottom Line
Bitcoin’s consensus decentralization is real.
But in a low-consent, stability-first world, the surrounding economic stack has been shaped to deliver compliance, steerability, and volatility control — while maintaining the public illusion of a free, decentralized network.
The result:
The code is neutral, but the corridors of usage are not.
I’ve already written about how most of Bitcoin’s success rides on the community and have suggested improvements.
Because many people might interpret this article wrong, I am NOT suggesting that Bitcoin’s fiat-denominated price will go down long term.