The risk of Bitcoin centralization is posed by outdated software and vulnerabilities at the Internet infrastructure level.
Trail of Bits presented a report titled “Are Blockchains Decentralized?” prepared specifically for the U.S. Defense Advanced Research Projects Agency (DARPA). The brief conclusions drawn by the analysts are that Bitcoin and other major crypto blockchain networks are susceptible to centralization risks.
The researchers identified several key factors that could affect Bitcoin blockchain centralization:
- Outdated versions of the Bitcoin Core client, which uses 21% of the network’s nodes. This can lead to consensus errors and forks.
- Lack of encryption in the popular Stratum mining pool protocol.
- Vulnerability of the Internet infrastructure. About 60% of the Bitcoin network’s traffic passes through the three largest service providers, which can limit or even deny access to individual nodes of the network.
The threat of centralization could affect recent initiatives using Bitcoin, including the ability to invest directly in the first cryptocurrency for 401(k) retirement savings accounts, which Fidelity Investments, a financial holding company, offered to its clients. Or the initiative of Deloitte, one of the largest financial services, to use Bitcoin to improve existing CBDC technologies. Jack Dorsey is also planning to revolutionize the Bitcoin-powered Web5 decentralized app.
