A Letter from NiceHash's CEO Saša Čoh to Bitcoin holders

Bitcoin's wealth is concentrating at the top of the stack while its security foundation, mining, is squeezed at the bottom. 

Bitcoin crossed into the financial mainstream by promising something no other asset can: value secured not by a government, not by an army, not by a central bank, but by mathematics and energy. That promise is real. But it comes with a condition that most of the market has quietly stopped thinking about.

The condition is mining. And the institutions that benefit most from Bitcoin's security model have remarkably little direct exposure to the infrastructure that provides it.

Two centralizations, one blind spot

When people talk about Bitcoin centralization, they usually mean one of two things, and rarely connect them.

The first is holding centralization. Bitcoin's ownership has concentrated at a pace that would make a gold bug blush. US spot ETFs custody well over a million coins between them, more than the untouched wallets attributed to Bitcoin's creator. Addresses holding a thousand coins or more account for roughly 35–40% of circulating supply.

This is not an accusation. Much of that concentration is custody on behalf of millions of underlying investors, and all of it is what institutional adoption looks like. It is the market working. But it changes who Bitcoin's stakeholders are, and it should change how those stakeholders think about their exposure.

The second is mining centralization, and here precision matters, because the risk is routinely both overstated and misunderstood. Two mining pools today coordinate roughly half of all observed block production. Four pools account for over seventy percent. By that measure, Bitcoin mining's Nakamoto coefficient (the number of entities needed to exceed half of block production) currently sits at three.

Three, however, does not mean three owners of the machines. A pool is a coordination point, not a proprietor. Behind those shares stand thousands of independent mining operations that can repoint their hashrate elsewhere in minutes. That mobility is real, and it is Bitcoin's genuine safety valve. But it does not dissolve the concern; it relocates it. The question is not who owns the ASICs. The question is how few coordination points sit between the world's hashrate and the blocks it produces, who constructs the block templates, and what happens to this layer economically as mining is squeezed through successive halvings.

Bitcoin's security has layers, and they concentrate differently. Hashrate protects consensus. Mining infrastructure determines who exercises that hashrate. Block-template construction determines who decides what enters the ledger. Collapsing all of this into the single word "centralization" is how the industry talks past itself.

And here is the blind spot: holding concentration and mining concentration are not separate stories. They are two ends of the same imbalance. Economic value has concentrated at the top of the stack. Security work has concentrated into a handful of coordination points at the bottom. And the wealthy end has remarkably little direct participation at the security end.

Every currency has an army. So does Bitcoin.

Every state stands behind its currency with the institutions that enforce its claims: a legal system, a taxing power, and ultimately an army. Money is a claim, and claims need enforcement. Bitcoin's army is its miners, with their hashrate. Proof-of-work is the network's standing defense force: hundreds of thousands of machines, consuming real energy, making it economically irrational to attack the ledger. The security of every satoshi in every ETF, every corporate treasury, and every cold wallet rests on that ongoing, physical expenditure.

But armies must be paid, and Bitcoin's pay structure is changing by design. The block subsidy halved to 3.125 BTC in 2024. It halves again in 2028, and again after that, marching toward zero. I will not tell you this ends in crisis: serious people argue fees and price appreciation will carry the load, and they may be right. What I will tell you is that Bitcoin is undergoing a profound, protocol-mandated transition, from a security model funded by issuance to one increasingly dependent on transaction fees and the raw economics of block production. Each halving makes miner revenue more volatile, more fee-dependent, and less forgiving.

That transition is scheduled, public, and largely unexamined by the asset's largest beneficiaries. And as I will argue in my next letter, it is no longer even the biggest pressure on the army's pay.

Gold got the easy deal. Bitcoin didn't.

Why is it unexamined? Because the market adopted Bitcoin through an analogy, and inherited the analogy's blind spot.

If all gold mining stopped tomorrow, gold would become more valuable. Its supply would be frozen; scarcity would do the rest. Mining, for gold, is pure production. Dilution, even. The asset does not need the mine. The mine needs the asset.

Bitcoin inverts this completely. If Bitcoin mining stopped tomorrow, the coins would still exist, but the network could no longer confirm transactions or advance its ledger. An asset you cannot move is an asset in name only. Gold's scarcity can be passive. Bitcoin's security cannot.

Institutions model Bitcoin as "digital gold," import gold's mental framework, and inherit gold's indifference to the mining layer. Digital gold is a fine metaphor for scarcity. It is a dangerous metaphor for security, because it is wrong at the one point where being wrong matters most.

And gold's mine has one more advantage Bitcoin's does not: it has nowhere else to go. A gold mine can only ever be a gold mine. A Bitcoin mine is a data center with options.

The foundation is everyone's business

If you hold a hundred bitcoin, the network's security is a background assumption. If you hold a hundred thousand, it may be your single largest unpriced risk.

Large holders, from ETF issuers and treasury companies to exchanges and family offices, have spent enormous energy on custody, insurance, and regulatory structure. Much of that effort protects against the failure modes institutions have learned to price. Almost none of it addresses the security layer underneath the asset itself. Cold storage does not help if block production concentrates into a handful of coordination points. Multi-signature schemes do not help if the mining economy hollows out as the subsidy declines. The most sophisticated custody in the world sits on top of a security layer its beneficiaries have never examined, never priced, and never funded.

Bitcoin has succeeded in becoming an asset. The next decade decides whether it remains a network. Those are not the same achievement, and the second is not guaranteed by the first. Holding centralization is a fact of maturity. Mining concentration is one risk; the economic pressures now building underneath the mining industry are another. The institutions at the top of the stack have the resources to engage with the bottom of it, without buying a single machine. In the letters that follow I will argue they also have the reasons and the instruments. They should not wait: a new, better-funded bidder has entered the market for mining's inputs.

Gold holders can ignore the mine. Bitcoin holders are standing on it.