Bitcoin Is Dead (Again), Long Live Bitcoin (Again)
Oh, the drama, such drama. Last week longtime Bitcoin developer Mike Hearn declared “the Bitcoin experiment…has failed,” and marked his resignation from that community with a fusillade of verbal grenades (and a New York Times profile of his dissent.) This in turn provoked a whole torrent of hot takes and reactions, which mostly had one thing in common: contempt for all who disagree.
Bram Cohen, the founder of BitTorrent, wrote Hearn’s rant off as “whiny ragequitting.” Greg Slepak posted a detailed, point-by-point technical rebuttal of Hearn’s accusations; a redditor did much the same on /r/Bitcoin, as did Ron Gross on Medium. Vivek Wadha declared “R.I.P., Bitcoin. It’s time to move on,” for the Washington Post, and posted the same article under a slightly less inflammatory title, er, here. Which in turn provoked another angry line-by-line response by Sam Patterson. Are you exhausted yet?
Beneath all that sound and fury, though, I promise you, something interesting is happening.
Bitcoin is, in fact, far further from death than it was all the (many) other times its demise was gleefully, and wrongfully, proclaimed. (Hearn’s central argument boils down to: “Bitcoin is failing because it has grown too popular!” Uh-huh. “Nobody goes there any more, it’s too busy.”) What does seem dead, however, is one particular vision of Bitcoin’s future; Hearn’s. Hence his parting broadside, which was roughly 70% sour grapes … and 30% valid concerns.
The apparent cause of the Great Bitcoin Schism Of 2015 was a technical dispute over Bitcoin’s block size. Long ago, Bitcoin’s implausibly mysterious progenitor Satoshi Nakamoto added a last-minute size limitation to the cryptocurrency’s “blocks” of transactions (which in turn make up its now-famous “blockchain.”) This was intended as a temporary anti-spam measure.
But that single line of code also limits the overall capacity of Bitcoin, which has grown so popular that is beginning to approach that hard limit — a limit that cannot be modified without a “hard fork,” which could (to oversimplify) split the Bitcoin blockchain in two. As long as a supermajority of the Bitcoin network quickly adopted the new code, this wouldn’t be disastrous — but it would still be a highly fraught exercise, and one that would inevitably leave some of the existing network behind.
If this were only a technical dispute, though, it would provoke far less rancor. What’s really at stake here are two far more contentious things: what is the future of Bitcoin? And who gets to define it?
As the always-perspicacious Fred Wilson put it, describing the first debate, “I liken it to this. Should Bitcoin be Gold or should Bitcoin be Visa.” Hearn’s vision was Bitcoin-as-Visa; a single vast transactional network. The alternate vision, now apparently in the ascendant, is Bitcoin-as-Gold … with, eventually, a semi-separate Visa layer built atop it.
Personally I too think the latter is the right decision. But the most important question, the crux of this Great Bitcoin Schism, is: who gets to make it?
In theory, the Bitcoin miners who have put many millions of dollars into their custom hardware decide what happens to the Bitcoin network. But they’re not expert developers. They can only choose whether or not to run the code presented to them. In practice, as is so often the case, an enormous burden of authority and responsibility accrues not to they who own the hardware, but they who write the software.
Bitcoin is an open-source project, but it’s fair to say that its core development has been largely conducted by a fairly small number of developers. This team–call them “Bitcoin Core”–is frequently accused (albeit on Reddit) of blatant conflict of interest, because several of them co-founded a well-funded startup called Blockstream, which is building, and presumably planning to monetize, various “Bitcoin 2.0” technologies. Bitcoin Core is staunchly opposed to the plan by Hearn (and Bitcoin developer Gavin Andresen) to immediately introduce the “hard fork” described above. Bitcoin Core favors a different plan to increase Bitcoin’s capacity.
I don’t think they are afraid that a hard-fork capacity increase will interfere with Blockstream’s business model; I think they genuinely (and correctly) believe that it is a (currently) technically unnecessary and strategically dangerous idea. But I also think they have explained themselves with the kind of dismissive lack of clarity all too common among brilliant engineers, and have misinterpreted and misunderstood the concerns of the rest of the Bitcoin ecosystem.
As a result, while Hearn may be gone, the hard fork lives on. A new alternative called Bitcoin Classic, introduced by a group of technically inferior but politically wilier developers, appears to be winning considerable (though not decisive) support.
I suspect things would have gone very differently if the Bitcoin Core folks had made what Ryan Shea calls “the scaling announcement they should have made.” And I suspect that, as cooler heads correctly observe, these are inevitable growing pains, a healthy clash of cross-pollinating ideas that will be good for the Bitcoin project and ecosystem in the long run…
…but let’s not all sing Kumbayah together just yet. As I noted above, Mike Hearn’s swan song may have been 70% sour grapes–but it was 30% completely valid concerns. Bitcoin’s runaway success, and the Great Bitcoin Schism Of 2015, have heightened the two uncomfortable fundamental contradictions still lurking darkly at its heart like Grendel.
The Bitcoin network must be decentralized, permissionless, and trustless. Otherwise it literally has no reason to exist.
But Bitcoin “mining,” the process of forging and securing the all-important blockchain, has become an industrial rather than artisanal activity, which (for technical reasons) only makes financial sense for companies who run their own custom-built mining chips in places with extremely cheap electricity. Hearn’s outrage that “the block chain is controlled by Chinese miners” may be one step removed from xenophobia, but the larger issue — that this decentralized system unfortunately happens to incentivize, maybe not centralization, but something a lot like oligarchization…
…is very much an internal contradiction, and one that won’t go away any time soon.
The Bitcoin Core folks know this. Indeed, their opposition to increasing the block size is partly rooted in a concern that it will centralize mining even further. But, unfortunately, the second internal contradiction is that the decentralized Bitcoin project needs some form of technical governance and guidance. “Rough consensus and running code” sounds great; but rough consensus among whom? Miners don’t have the technical chops to guide and evolve the Bitcoin codebase. Very few people do, right now — and most of them are part of Bitcoin Core.
Which means that “decentralized” Bitcoin, especially now that the influential Hearn has flounced away, arguably already does have a de facto governance group… one that happens to be unwritten, informal, and largely employed by a single for-profit company. However well-intentioned Bitcoin Core may be (and I personally completely believe in their good intentions) and despite the “rough consensus” from the Scaling Bitcoin conferences, it’s easy to see why many others find the situation awkward at best, and unacceptable at worst.
I don’t have a solution for the first contradiction. But I do for the second. I submit that Bitcoin has grown in size and importance to the point that it now needs some equivalent of the IETF or ICANN. (Before anyone brings it up: no, not like the Bitcoin Foundation.) That’s a deeply staid, boring, bureaucratic notion, I know, especially for a revolutionary anarchic decentralized cryptocurrency. But technical decisions made under that kind of political aegis would be easier to accept for all concerned. Perhaps the time has finally come for Bitcoin to become just a little bit more boring.
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.