Vitalik Buterin challenges Michael Saylor’s dismissal of Bitcoin centralization risks

Ethereum co-founder Vitalik Buterin has added his voice to the chorus of condemnation facing MicroStrategy co-founder Michael Saylor following the latter’s comments advocating institutional custody of Bitcoin (BTC).

Buterin’s criticism came after Saylor suggested in a recent interview that large institutions holding Bitcoin can reduce the chances of asset seizures, which lawless cryptocurrency holders could most likely cause.

Saylor institutional custody attorneys

In the Oct. 21 meeting with Madison Reidy, the self-described Bitcoin maximalist discussed a wide range of issues, including the potential for wider adoption of the asset among businesses and governments. He also advocated the need for easy-to-use BTC investment products, suggesting that they are crucial to the mainstream acceptance of the cryptocurrency.

However, it was Saylor’s response to Reidy’s question about the potential risk of making Bitcoin more centralized by putting it in the hands of a few large institutions that drew the ire of the community.

He suggested that such a scenario could increase the risk of confiscation and confiscation, as happened with gold in the 1930s. Saylor dismissed the concern, calling those who had it “paranoid crypto-anarchists.”

“People say that, but most of them are paranoid crypto-anarchists. It’s a myth and a recurring trope. First of all, the government didn’t seize the gold back then; people gave it up voluntarily,” said l former CEO of MicroStrategy.

Saylor argued that regulated entities like BlackRock and Fidelity, rather than individuals or small custodians, should be the primary holders of Bitcoin. He claimed that this would protect the cryptocurrency from government seizure while ensuring its stability in the wider financial system.

He further stated that these same anarchists could start a Bitcoin confiscation event because of their disdain for the rule of law:

“I think when Bitcoin is in the hands of a group of crypto-anarchists who are not regulated entities, who don’t recognize government or don’t recognize taxes, or don’t recognize reporting requirements, that increases the risk of embargo” .

Buterin’s stance on self-custody

But Vitalik Buterin disagreed. In an Oct. 23 response to a post by crypto-security expert Jameson Lopp, the Ethereum co-founder said Saylor’s argument effectively promotes centralization, which Bitcoin was designed to avoid.

In his view, trusting institutional actors with custody of the asset erodes the very foundations of decentralization on which cryptocurrencies are built.

Buterin also pointed to his previous involvement in the “mountain man” stereotype surrounding BTC self-custody, calling the notion outdated. He stated that advances such as zero-knowledge proofing and account abstraction have evolved security trade-offs for self-custody.

The developer contends that Saylor’s view of institutional custody is dangerous, suggesting that self-custody, while not without its challenges, is important to Bitcoin’s long-term security and integrity.

Buterin’s Ethereum has also had its own problems with centralization. A 2023 report showed that more than 60% of its nodes were running through centralized entities such as Amazon Web Services (AWS) and Google Cloud. It prompted the co-founder to suggest the use of stateless clients as a possible solution to the problem, although he acknowledged that it could take 10 to 20 years to get there.

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