There is a common misconception about cryptocurrency. Many think that whoever controls the mining power, controls the network. Therefore, China can shut Bitcoin down. That is false. Although miners have influence on the network, they do not control it. No single entity controls a blockchain-based network that is decentralized and distributed by definition, and miners only have economic power. Nodes dictate which kind of software these networks run, which gives them the “political” power. But then again, they can only exercise this power by consensus. Nevertheless, the geographical distribution of these nodes can be a source for concern. How does the geographical distribution of nodes work for Bitcoin and Ethereum, what does it tell us about their resilience, and should we be concerned?
Big Bad Government!
Running a Bitcoin or Ethereum nodes allows them to communicate with each other using a common protocol within a network. This is why geographical distribution of nodes is so important. If a significant number of either Bitcoin or Ethereum nodes were in China, then the government there would be able to shut the networks down.
Why does Geographical Distribution of Bitcoin and Ethereum Nodes Matter?
Fortunately, most Bitcoin and Ethereum nodes run in countries in which freedom of speech is protected at some level. Running a protocol like Bitcoin or Ethereum falls squarely within the realm of freedom to communicate and express different ideas. This means that governments don’t have as many tools to shut Bitcoin or Ethereum down arbitrarily and people who run nodes on either network have legal recourse to prevent their governments from overstepping.
Wider distribution of nodes also guarantees that if there is one government willing to abuse its power within its territory to shut either network down, it would have to launch a concerted effort with other governments to succeed. That is highly unlikely. Just look at action on climate change: everyone knows it is an issue, but governments are utterly incapable of doing anything or even agreeing on a plan of action. There are always governments opposed to an agreement.
Where are Bitcoin Nodes Concentrated?
So, where are Bitcoin and Ethereum nodes concentrated geographically, and how independent are they from miners? The answers to both questions are critical to assess how healthy each network is.
Bitcoin seems to have more nodes than Ethereum, which makes it marginally more resilient than Ethereum. There are currently just over 9,300 public nodes in the Bitcoin network. That compares to the 8,200 nodes that Ethereum boasts. According to Bitnodes, Bitcoin nodes are distributed as follows:
- 25.36% in the US
- 20.2% in Germany
- 6.54% in France
- 5.37% in the Netherlands
- 3.84% in Singapore
- 3.61% in Canada
- 3.57% in the UK
- 2.83% in China
- 2.3% in the Russian Federation
- 2.25% in the rest of the world
Singapore has by far the highest Bitcoin node density relative to its population. Coming in after Singapore, the Netherlands has the second highest Bitcoin node density in the world. These numbers also show that an overwhelming majority of Bitcoin nodes (at least 64.65%) are in countries in which there are some guarantees for freedom of speech.
The Cornell Study on Geographical Distribution of Bitcoin and Ethereum Nodes
Bitcoin nodes, however, are more likely to be housed in data centers and are clustered closer to each other. According to a peer-reviewed study from Cornell University, as many as 56% of all Bitcoin nodes run from within data centers. Ethereum only has around 28% of its nodes running from within data centers. Additionally, Ethereum nodes are more widely spread out. This is an advantage that Ethereum has in terms of resilience.
Bitcoin node clustering around data centers also suggests that miners might be running a significant portion of all Bitcoin nodes. This suggests that the miners who should have mostly economic power within the network, have gained a sizable political clout. For Ethereum the story is different, also due to the fact that this network will transition to a PoS algorithm – validators will take on the duties of the miners.
Where are Ethereum Nodes Concentrated?
Ethereum nodes, however, are more highly concentrated in China than Bitcoin nodes. In fact, it seems that Asia is skewed towards Ethereum nodes while the US and Europe are more skewed towards Bitcoin nodes. This presents a problem for Ethereum. The geographical distribution of Ethereum nodes according to Ethernodes is as follows:
- 26.19% in the US
- 16.05% in China
- 9.49% in Germany
- 6.96% in Singapore
- 6.85% in Hong Kong
- 6.04% in Japan
- 4.69% in S. Korea
- 2.41% in France
- 2.21% in the Netherlands
- 1.74% in the Russian Federation
- 17.37% in the rest of the world
Ethereum is therefore more exposed to a shut down in China and Hong Kong – which is an autonomous territory under Chinese sovereignty – than Bitcoin. Nevertheless, with more than 65% of nodes running in countries in which freedom of speech is enshrined in the law, Ethereum is not as vulnerable as it seems.
Increasing Node Count and Geographical Distribution
Bitcoin and Ethereum enthusiasts alike, are well aware of these numbers and their implications. The fact that there are millions of Bitcoin and Ether holders, but fewer than 10,000 nodes in each network is what worries enthusiasts the most. Since nodes grant political power within the network but they also make it more resilient, it is important to increase node count. That increase should come from widely diverse geographical locations to add to the resilience of both networks.
Fortunately, there are quite a few companies that are building plug and play hardware options for people who want to run nodes and are not as tech savvy as the earliest or most technically adept cryptocurrency adopters. You should check those out and consider running a node to strengthen either network. If nodes aren’t your thing, why not trade Bitcoin and Ethereum on the world’s leading social trading platform, eToro.