On the surface, Bitcoin seems to be doing very well.

But like a trophy fish or lost children being fattened up by a witch, sometimes the bigger something gets, the more vulnerable it becomes.

As Bitcoin’s price soars and its market concentration shoots up… it may be revealing a glaring flaw in one of our favorite cryptos.

And we write about cryptocurrencies not despite their flaws, but because of them.

Espresso Shots

☕️ Binance Booted From Belgium 🇧🇪🥾

Binance received a notice on Friday from Belgium’s Financial Services and Markets Authority alleging that Binance’s Belgian office was illegally offering services to countries that are not members of the European Economic Area.

"The FSMA has therefore ordered Binance to cease, with immediate effect, offering or providing any and all such services in Belgium," the notice read.

In addition to an investigation in France and the United States, as well as a removal from Cyprus and the Netherlands, Belgium can now be added to the growing list of nations in which Binance may have stepped on some toes.

The FSMA stands firm in its decision, despite Belgium’s famous reputation for waffling.

☕️ Bitcoin jumps to $31,000 🤑💵

Bitcoin jumps above the $31,000 mark on Friday, marking the cryptocurrency’s year-long high.

Its price hike was shepherded by large, institutional investors pouring into crypto and the launch of EDX Markets, a TradFi-backed exchange with a focus on BTC.

Bitcoin ultimately hit a peak of $31,389, but has since dropped closer to the $30,000 mark.

Even without the cheers of Bitcoin Maxis, investors are right to remain optimistic as the macro-influence of these larger institutions rock the space.

Bitcoin has reportedly quit smoking and begun looking at quieter neighborhoods and used Subarus as the coin reenters its early-30s.

☕️ Superstore Bomb Threats Demand Bitcoin 🚨🚓

A rash of bomb threats against stores like Walmart, Kroger, and Amazon have claimed they will detonate their bombs if their demands for gift cards, cash, or Bitcoin are not met.

The threats have appeared across the nation, primarily in Chicago, New Mexico, and Wisconsin.

One threat in Chicago against a local Whole Foods declared it would detonate a pipe bomb in the store unless demands for $5,000 BTC are met, as reported by The Wall Street Journal.

One Walmart greeter, hardened by decades of Black Friday violence, calmly reached for her microphone and announced, “Bomb threat on aisle seven.”

Spilling the Beans

This One Flaw Could Ruin Bitcoin 💣 💰

The larger something gets, the harder it is to control. That’s true of a toddler, a bull calf, or that cult you started.

And when you can’t control something, danger and devastation are almost always around the corner.

And that may be the case with Bitcoin.

Bitcoin passed the $30,000 mark this week, even breaking the $31,000 mark on Friday.

This price hike has been a combination of TradFi giants pouring into crypto such as Deutsche Bank, BlackRock, Charles Schwab, and more.

But this news shouldn’t surprise you.

It’s a welcome bump, and yes, it’s good, but Bitcoin’s nowhere near its $65,000 summit from November 2021.

And additionally, Bitcoin currently controls roughly 50% of the total crypto market.

But that shouldn’t have you fanning yourself either. Bitcoin has, at times, controlled roughly 66% of the total crypto market.

No, the glaring flaw in Bitcoin’s armor comes from Bitcoin’s block validation.

The last thousand Bitcoin blocks were mined by only two Bitcoin mining pools.

In fact, roughly 71% of the total Bitcoin block production is controlled by three, huge pools.

Just look at this handy chart from investor and crypto journalist, Evan Van Ness.

https://twitter.com/evan_van_ness/status/1669099660839927812

As you can see, the vast majority of block production is controlled by Foundry USA, AntPool, and F2Pool.

But there are some serious issues that come from this sort of three-way monopoly, or, uh, triopoly.

First, in terms of security, this is a worrisome development.

If childhood games of Battleship taught us anything, it’s that you don’t group all of your boats in one corner.

It’s the same reason that even the most intro-level financial advisor is going to urge you to diversify your portfolio.

By putting all of your eggs in three baskets, you’re putting yourself in a precarious position.

If those pools experience widespread hacks or are otherwise compromised, Bitcoin’s going to take a serious beating.

On the other hand, if one of these pools seriously outpaces the other two, Bitcoin may be vulnerable to a 51% attack.

This is when a group of miners that control 51% or more of a given cryptocurrency can “attack” that crypto’s blockchain and slow down or altogether halt block creation for that crypto.

It’s an expensive maneuver and so far has only been successful with smaller cryptos and networks, such as Vertcoin, Hanacoin, and Litecoin Cash.

A 51% attack isn’t likely with a cryptocurrency on the scale of Bitcoin or Ethereum. And it turns out a 51% attack is incredibly expensive, even for smaller cryptocurrencies. But as these Bitcoin pools grow and become more monolithic, it becomes more feasible.

Decentralization was intended to be the antithesis of this kind of monopoly.

But one look at the language on Foundry USA’s website, and you’ll see this isn’t always the case anymore: “Finally, a US-based, truly institutional grade mining pool brought to you by Foundry.”

As Bitcoin grows larger, are the institutions surrounding it going to look more and more like banks and hedge funds?

Look, Bitcoin’s huge. So huge that, in the crypto food chain, BTC wouldn’t be a blue whale. It’s more like several thousand blue whales with all their tails tied together, like a 16th-century rat king.

A whale king.

But being that large comes with some serious responsibilities. Heavy is the head that wears the whale crown.

We may need tidal wave-tier shifts in the Bitcoin pools before this whale king ends up beached on the rocky, unforgiving sands of centralization.

Meme of the Day

Crypto 101

Wei: Much like a Satoshi of Bitcoin, a “Wei” is the smallest amount of Ethereum that can be transacted.

A Wei is equivalent to ten to the negative eighteenth power of Ethereum, or one quintillionth of an ETH.

A Wei is named after Wei Dai, a crypto engineer who founded the b-money system and established the Crypto++ library.

The Last Sip

The Last Sip: Other than offering crypto services to countries that aren’t members of the European Economic Area, here are the three greatest crimes you can commit in Belgium.

3. Claiming that French Fries were actually invented by the French.

2. First-degree murder.

1. Ordering a Blue Moon.

Stay Caffeinated,

Coffee & Crypto Team

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