What Makes Bitcoin Special

I can only speak for myself, but I have had many conversations with the core developers and I feel confident that the sentiments and opinions expressed in this post align with the sentiments and opinions of many of the Bitcoin Core developers.

I was introduced to Bitcoin in 2011. A decentralized currency that could not be controlled by any government, could not be controlled by a bank, could not be censored, had a fixed inflation schedule, and was trustless: ‘Magical Internet Money.’ Investigating Bitcoin took over my spare time and eventually the rest of my life as well. Bitcoin has become my career, my passion, and is a huge part of what defines who I am.

Above all, Bitcoin is interesting to me because it is decentralized. The promise of Bitcoin is a currency that is not controlled by any government. The inflation schedule is determined by algorithms, payments are irreversible, and funds are protected from seizure by corporations and government authorities. As a bonus, Bitcoin has some of the strongest security of any financial system accessible to the common man. Between hardware wallets, cold storage, multisig, and strong cryptography, secure Bitcoin setups are miles ahead of anything you can get from a bank. Bitcoin ignores borders, and transactions can move money to any person or place in the world in under an hour. With payment channels, times can be brought well under a second.

A major feature of Bitcoin is that it is trustless. When this is stated, what is meant is that when your client tells you about a balance or a series of payments, you can be certain that the client is telling the truth and that the truth is economically difficult to rewrite. When PayPal tells you a bank balance, you need to trust that PayPal is telling you what they think is the truth, that they are doing their accounting correctly, and that they are not going to freeze your account, deny you access to withdrawal, or declare bankruptcy.

Decentralization is important because people make mistakes, people do bad things, and public opinions can turn against your favor. The crisis in Greece is a good example of a monetary system that turned against its people. Because there is no source of control in Bitcoin, a similar thing could not happen. PayPal has a long reputation of freezing merchant accounts or blocking payments days or weeks after a purchase has gone through, forcing the merchant to accept a loss. These payment reversals are not possible when Bitcoin is used correctly. The United States engages in inflationary monetary policy that I disagree with, to the expense of every holder of the US dollar. By keeping my savings in Bitcoin, I can isolate myself from all of these problems while still having an asset that is easily liquidated. Decentralized money has many other advantages as well, some of which are explored in a post by Matt Corallo.

Bitcoin is big, expensive, and heavy. Where decentralization is not necessary, far more efficient systems can be used to achieve the same goals. Bitcoin is only valuable so long as it is decentralized. As the number of relevant players in the ecosystem decreases, the strength of the properties provided by decentralization also decreases. If there were only a handful of miners, a handful of exchanges, and each was a multi billion dollar entity, than each would fully subject to the regulations of the jurisdiction in which they operate. And as a result, Bitcoin would be subject to regulation. Miners would not be able to mine transactions that were not approved by the government, and exchanges already cannot exist without performing due diligence on their customers. When there are a small number of entities controlling most of the ecosystem, controlling Bitcoin only requires getting to those entities.

Bitcoin Classic has caused a significant amount of stress among many of the prominent developers, researchers, and contributors in the ecosystem. And the primary fear is not that the network will not survive 2MB blocks. It’s also not that the network will not survive a hardfork, though the timeline presented in Classic is reckless and will cause damage. The biggest red flag is how quickly and unexpectedly Classic gained the support of more than half the hashrate and several major exchanges. Much of the support had seemed to arise from conversations behind closed doors, and it seemed that the support was only possible because of the great centralization in the system. Worse than the centralization alone, that centralization had voted to change the rules of the system from under the feet of the participants, and had enough economic influence to force a schism, potentially driving out many of the weaker parties in the system.

A contentious hardfork means that at least some members of the network are being forced to upgrade against their will. A contentious hardfork is tyranny of the majority. I do not want to participate in a system where two wolves and a sheep are voting on what to have for dinner, especially when I am the sheep. I prefer Bitcoin to fiat explicitly because it is harder for people to manipulate my money against my will. Any contentious hardfork is a huge red flag that the system is not working, and indicates that future contentious hardforks are also possible. Even if I am on the winning side of this hard fork, I might not be on the winning side of the next one. For this reason, I am incredibly opposed to contentious hard forks. If Bitcoin were to successfully execute a contentious hard fork, I would leave. The most fundamental security properties of Bitcoin are violated for at least a small number of participants during the execution of a contentious hardfork, and that’s enough of a problem to make the system not worthwhile to me. And I know that a significant portion of the core development team feels the same way.

Reddit has reacted to the development team’s threatened departure in a confused way. They have stated that the contributions of the core dev team are valued and welcome, but they fail to understand why the developers contribute in the first place. Bitcoin has some world class engineers working on it, and these engineers are giving their time and energy to Bitcoin for free. Most of them do not do it for social status or resume building — they already have resumes as powerful as they need. The developers work on Bitcoin because it is an interesting and worthwhile project to them. They work on it because they believe it is special, and because they want to see Bitcoin succeed. Some of the developers have endured excessive abuse and made enormous sacrifice to see Bitcoin succeed, and they don’t do it for themselves. After a contentious hard fork, Bitcoin loses that sheen, loses its specialness, and no longer represents the values that the development team has worked so hard to advance. That’s why they would leave. They would leave because, to them, Bitcoin would no longer be special, and would no longer merit sacrifice.

Bitcoin Core has had poor public relations, to say the least. People feel as though they are being ignored, as though Core is dragging their feet, and as though Core is holding Bitcoin back from the dominant global currency that they think Bitcoin is capable of becoming. The truth is that over the past two years, Core has spent more energy on scalability than on all other aspects of Bitcoin combined. The scalability roadmap produced includes provisions for increasing the effective block size, making improvements to the peer protocol and validation code that will pave the way for additional block size increases, and include plans for solutions that will make each byte on the blockchain stretch substantially further. The scalability roadmap signed by the Core team represents the best efforts of the best mind share in the industry, and stretches Bitcoin as far as possible without compromising decentralization or security.

Decisions are made in Bitcoin Core through an open, merit based process. Anybody can join the mailing list or jump on a Github issue and contribute their thoughts or submit their code. Anybody can propose a change to the system or add commentary to another proposal. When something is proposed, it is considered by merit and then any objections are raised. The proposal is not approved until there is ‘rough consensus’ around the proposal, meaning that all objections have been addressed at length, even if they are not accommodated. The IETF follows a similar process, explained in RFC 7282.

Though Bitcoin is completely open, participation is still difficult. Bitcoin is ultimately a cryptographic system, and has many subtleties and nuances that mean only experts are really able to appropriately evaluate the system and propose sound changes. Even then, most of the proposals from the experts are either rejected or forced through many iterations before they are suitable for deployment. Even highly technical people are at risk of making naive and severe mistakes until they’ve spent a long time gaining Bitcoin-specific expertise. To make matters worse, there is not any good place to learn about Bitcoin. Today, if you want to become a Bitcoin expert, the best you can do is read thousands of mailing list posts, thousands of forum posts, thousands of pages of IRC logs, and have long conversations with the existing experts.

While there’s no clear way to reduce the amount of expertise required to constructively analyze and change Bitcoin, we can simplify the journey to expertise. People at MIT and at Harvard have agreed to collaborate on a new platform for synthesizing and expanding Bitcoin knowledge. While there is currently nothing to show, the need is clear and people are motivated to help out.

I am also hoping that we will start seeing more long form posts by the Bitcoin Core developers about Bitcoin, about their opinions, and the reasons behind their opinions. There is a lot of pressure on the developers to improve communication, and I think blog posts are a great way to give people more windows into the thought processes that drive the decisions behind Bitcoin Core.

I will conclude by reiterating that Bitcoin is very special, and that it is special because it is decentralized. Lose that, and Bitcoin is not much different from PayPal or the USD. The people who have dedicated their lives to Bitcoin have chosen Bitcoin because it is special to them, and because its much more than a way to pass the time. If you lose the properties that make Bitcoin special, you will lose these people as well.

Afterthought: Why is it not considered tyranny when a minority is blocking a change to the system, therefore forcing their opinions and wants over the majority?

To me, the ethical difference involves switching cost. When you decide to settle with something, for example you decide to store your savings in Bitcoin, you analyze the rules of the system, learn the system, learn the risks and consequences, and then you get to choose. And everybody else who is using the system had the same opportunity. When suddenly a bunch of people want to change the system, that change is going to defeat all of the prior analysis and thrust people into systems that they may be ethically opposed to.

The people who are trying to make the change though originally agreed to the rules that were in place. Because they agreed to the original rules, the onus is on them to leave and find a new system when they decide that they want new rules.

If everyone is in agreement that the rule changes are good, or at least there is overwhelming support for the changes (far far greater than the majority), then I think it is ethically justified. But if it is common for systems to change rules based on majority or even 75% agreement, even as infrequently as every ten years, people will never be able to truly settle, and will always have to move from dynamic system to dynamic system. Ideally, this turmoil could be minimized.