I have been meaning to write this for a long time, but put it off because it’s such a difficult topic. I will do my best in this post, though.
If you don’t want to read it all or fall off early, the most important sentence in it is “hashrate follows money”. Just try to remember that as you read.
A lot of people think miners have total control. They are the ones who were baffled when Segwit2X failed and Bitcoin XT failed and BCH is valued at a fraction of what it was on it’s inception. They can’t fathom why something with so large miner support failed (note: I don’t have any numbers of this supposed miners support, but I am willing to admit it was at least large enough to make a dent).
The answer is simple: Miners use an insane amount of energy to mine blocks. But they have no more power than anyone else to decide whether a block is valid. Any node enforces the consensus of bitcoin for themselves, and drops invalid blocks – no matter how much hash rate is behind them.
The coins that miners mine is in a transaction in a block – the coinbase transaction., If the ecosystem deems the block invalid, they can’t spend those coins anywhere. Yes, you read it correctly: They don’t decide for you whether or not those coins are valid, your node those. You uphold consensus for yourself by choosing what node to use to validate the transactions you are part of.
So, do this mean you can go on a and change the definition of bitcoin for yourself, by changing the consensus for yourself? Of course not, not in reality. You’d need miners to mine your chain, and unless you want to be your own little ecosystem trading with yourself, you need others to agree with this consensus. But this is exactly the same for miners – they’ll have to sell most of the coins they mine, so they depend upon people following the consensus they mine.
But, what about exchanges? Couldn’t they team up with an exchange or two, to sell their coins? Sure, they could. But exchanges need to sell the coins they buy from the miners, and if the ones buying coins from their exchange doesn’t see those coins as valid, they can’t sell them. So exchanges does not want to buy worthless coins.
So, who really decides what bitcoin is? The answer is: We all do. And this is why decentralization matters. The more people running a full node, the more resistant do we get against manipulation by single persons.
You might have heard about the Hong Kong and New York agreements, that a company called Blockstream supposedly broke? It’s bollocks, because bitcoin was already then resistent to takeover from a single company. Blockstream doesn’t hold that much power over bitcoin, though they do fund a few developers, as is common when you depend upon some piece of open source software.
So….doesn’t this mean bitcoin goes nowhere? No. It can change, but only when it’s obvious it has to. But it won’t be miners that force it, it won’t be developers. It will be the ecosystem as a whole. We’re in this together, and because we all keep each other in check, we are resistant from individual (people or organizations) manipulation.
And this is the genius of bitcoin. Not that we can scale to the moon, not that we can “take over” the world economy. We can simply provide a currency that’s resistant to manipulation. And that’s where bitcoins power lies.