Cryptology ePrint Archive: Report 2013/829

Is Bitcoin a Decentralized Currency?

Arthur Gervais and Ghassan Karame and Srdjan Capkun and Vedran Capkun

Abstract: Bitcoin has achieved large-scale acceptance and popularity by promising its users a fully decentralized and low-cost virtual currency system. However, recent incidents and observations are revealing the true limits of decentralization in the Bitcoin system. In this article, we show that the vital operations and decisions that Bitcoin is currently undertaking are not decentralized. More specifically, we show that a limited set of entities currently control the services, decision making, mining, and the incident resolution processes in Bitcoin. We also show that third-party entities can unilaterally decide to “devalue” any specific set of Bitcoin addresses pertaining to any entity participating in the system. Finally, we explore possible avenues to enhance the decentralization in the Bitcoin system.

Category / Keywords: Bitcoin

Date: received 3 Dec 2013, last revised 5 Mar 2014

Contact author: ghassan at karame org

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Version: 20140305:114802 (All versions of this report)

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