How Bitcoin Rule Making Does Not Work

If you are following Bitcoin, you may have heard that there are differing views on how to increase transaction capacity. I have an opinion on which of those views is preferable. I will keep said opinion to myself here, since it is not relevant for this post.

Let’s call them plan A and plan B. Obviously this raises the question of how Bitcoin decides on the three possible outcomes (adopting A, adopting B, and doing nothing leaving the status quo intact).

This is a difficult question. The goal of this post is limited. It only tries to show which models of rule making don’t work.

  1. Miners are not the Kings of Bitcoin

The first idea is that you can change any rule if you have a majority of hash power.

It is true that the majority of hash power applies the existing rules to decide on one version of the blockchain. The chain with the most proof of work rules absolutely. Any minority chain is discarded under the present rules.

This is the only function miners have in Bitcoin. If you have a majority of hash power, you could censor transactions or double spend your own coins. But this behavior is frowned upon. It is correctly understood as an attack on the integrity of the network.

Bitcoin only works without trust in any party involved if there is no miner who has a hash power majority in the first place. Therefore concentration of mining power needs to be avoided, so as to avoid even the theoretical possibility that some miner would abuse that power for censoring transactions or double spending.

Changing the transaction rules against the will of the minority is a much more severe abuse of mining hash power than double spending some coins. The double spend only affects whoever was a counterparty to the deal in question. In contrast splitting the blockchain affects everyone.

If a majority of miners had the power to change consensus rules, everybody else would be reduced to needing to trust them. That’s not compatible with the basic idea of a peer to peer currency.

2. The Core developers are not the Kings of Bitcoin either

There are several hundred people involved in the Bitcoin Core project. Everyone can participate. You don’t need permission from anyone. Even miners can participate.

All new proposals are discussed in a peer review system. If they have merit, they will be merged into the latest upgrade. And such proposals that are uncontroversial will eventually be used by everyone.

But that does not give the developers the power to decide between plan A and plan B.

For one, they very wisely don’t desire such power. If you are the King of Bitcoin, you paint a large target on your back for everyone who wants influence. You also may be legally liable if the software you developed is abused for criminal purposes. Or the government may go after you alleging exactly that (this happened with the developer of the “Winny” peer-to-peer software in Japan).

Also, if the developers are the Kings of Bitcoin, everyone would need to trust them. But the basic idea of Bitcoin is that you don’t need to trust anyone. So having one group of developers in charge of deciding would defeat that basic goal.

3. Saint Satoshi is not the King of Bitcoin either

Sometimes people try to use old quotes of Satoshi Nakamoto to argue for plan A or plan B.

That doesn’t make much sense either.

He has left the project. And whatever he may have said in 2010 was against the background of a completely different stage of the Bitcoin project.

An open source project can have one leader who decides on all the controversial points. Bitcoin is not such a project. If it was, everyone would need to trust Saint Satoshi, which again is not compatible with the basic idea of having a peer to peer currency where you need to trust no one.

4. Round table participants are not the Kings either

The latest progress in adopting Segwit for the Litecoin project was the result of an online video conference. So one could imagine setting up a list of Very Important Bitcoiners (VIB). Then set up a online video conference with them (VIBOVIC). Accept whatever they come up with as the new consensus rules.

This approach would need to answer several questions. Who is Very Important? Who would call the meeting? Who would chair it? Why should anyone not at the meeting change their mind?

5. What’s left?

I don’t know. Tell me. Bitcoin has trouble finding a rule making and upgrading process because its most important feature is exactly that nobody is in charge.

But eventually, we’ll see. Transaction capacity won’t stay at the present levels forever. One way or another, one of the different plans for increasing capacity will get adopted.

When that happens, the answer to the question of exactly how controversial questions are decided in Bitcoin may  be even more important than exactly when the block size is increased and/or Segwit is adopted.