As a decentralized system by design, it can be difficult to see where the real power lies in Bitcoin. There are a number of different players in the ecosystem (e.g. miners, hodlers, exchanges, developers), but one entity has more power than the others in terms of what types of protocol improvements will be made.
As I’ve explained previously, the hodlers (again, not a typo) have the biggest impact on the bitcoin price due to the effect they have on the supply of available Bitcoin. Taking this point further, they also have the largest amount of power in terms of what types of improvements are made to the Bitcoin protocol because everyone in the system is incentivized to make the native tokens on the platform as valuable as possible.
Why Investors Control Bitcoin
The idea that investors are the ones who control Bitcoin is not a new idea. Multiple articles and blog posts have been written on the topic over the years. Daniel Krawisz’s article on this topic for the Satoshi Nakamoto Institute is perhaps the most notable.
In 2017, Bitcoin hodlers’ collective level of control over the network was put to the test as large companies in the space combined with more than 90% of the network hashrate in an attempt to move everyone over to a new network they would agree to call “Bitcoin.”
In the end, the combination of multiple futures markets for the coins on the potential new network combined with a variety of other factors (such as the view of SegWit2x as a corporate takeover) led to an abandonment of the proposal before it was scheduled to activate. Miners were only willing to mine the less valuable chain (as predicted by the futures market) for 12 hours after the activation of the new network (see this article for a full breakdown of what happened with SegWit2x).
As indicated by the SegWit2x situation, miners are incentivized to mine the most profitable chain for their business, which means the chain with the highest valuation and level of activity. In other words, they’ll do what hodlers tell them to do. Exchanges and wallet providers will simply provide access to whatever chain their users demand.