Note: This article is for individuals with a basic understanding of the Bitcoin protocol and those who have a general understanding of the protocol's governance.
Introduction
There is much hoopla about 1 August 2017; some call it "Bitcoin’s Independence Day.” But independence from what? Isn’t Bitcoin supposed to be free of central banks, central governments and the inefficiencies of the modern, international financial system? When someone adopts Bitcoin it allows the individual to become part of a community that relinquishes the chains of the financial system that most of us think that we understand. But, adopting a new system is not without complication. More specifically, in the Bitcoin system one of the protocol’s flaws, I mean features, is that it gives Miners virtual veto power over major decisions in the ecosystem.
Under Satoshi Nakamoto’s original White Paper, Bitcoin’s protocol allows for “one CPU, one vote.” Satoshi’s techno-egalitarian model is built on the idea of relatively predictable advances in computing power. But Bitcoin’s creator or creators probably could not imagine the Pandora’s Box opened by a singular goal within the protocol: to control mining so that one or some can control Bitcoin. In the early days, decisions were easy because they were all made by Satoshi. But things change. Gavin Andresen, The Bitcoin Foundation’s Chief Scientist put it this way: “How do we evolve from—it used to just be Satoshi making decisions; to it was this small group making decisions; to suddenly there’s a much larger set of people who are interested in decisions and how they’re made."
At first thought, Satoshi’s idea is pretty simple and pretty liberating in the digital age: “one CPU, one vote.” But, as with many technologies, few things remain static. And so it is with Bitcoin. First there was the CPU, then there was the GPU, then there was the multi-GPU, then there was the ASIC, then there was the cloud ASIC, then there was Ant-bleed, and then there was ASIC-boost. Each successive advancement in Bitcoin hardware mining technologies gives a smaller and smaller group of individuals, more and more control over Bitcoin mining. At present, two companies dominate the Bitcoin mining world: BitMain and BitFury.
So complete is their control of mining hardware on the Bitcoin protocol, that they have moved beyond the hardware aspects of mining equipment. Allegedly, at least BitMain, has been accused of altering software interactions with their miners so as to give their miners advantage over all others vis-a-vis ASIC-boost or that BitMain could control the miners themselves vis-a-vis AntBleed. If true, one word can summarize this situation: greed. But in a protocol governance model that rewards greed, however unwittingly, one can’t blame the accused for their actions. Thus, we discover the real reason for Bitcoin Independence Day, I’ll call it the “BID.”
At issue is Bitcoin’s much anticipated, potential conclusion of the blocksize debate. The issue is being forced to a conclusion by a so-called "User Activated Soft Fork” (UASF), in which another class of the Bitcoin community, Users, attempt to assert a degree of autonomy within the protocol. Their Bitcoin Improvement Proposal (BIP) 148 forces the activation of a blocksize scaling solution known as Segregated Witness (SegWit) on 1 August 2017. Though the name implies it is “user activated” the only group of players within the Bitcoin system that can ensure the viability of BIP 148 are, ironically, the Miners.
Of course there are several alternatives to SegWit that entail larger blocksizes from 2MB to an unlimited number. But, unlike several other proposals, BIP 148 comes with an actual date of implementation instead of the typical, high network consensus requirement. The argument goes that: if BIP 148 is activated on 1 August 2017 by the Miners, Bitcoin independence would be for the Users from the Miners. Although this is not necessarily true, it does set a pretty definite dividing line for Miners to finally make a decision about how the scaling debate will unfold. However, as discussed by a variety of writers, the forthcoming SegWit UASF leaves more questions than it answers. I argue that BIP 148 and all of the scaling solutions leaves unanswered, perhaps, the most important question for Bitcoin: if successful, what does Bitcoin governance look like after the BID?
The Human Dimension & the Demons of Bitcoin
In an ideal code-world, Satoshi’s mining solution to Bitcoin governance makes complete since but, alas, we do not live in an ideal world of code. We live in a world of competing interests that, even when subjected to code is even more heavily influenced by human behavior. It is clear that Satoshi Nakamoto and the Bitcoin Developers are excellent coders and have a pretty good grasp of economic theories. However, code and economics are subject to the blessing and scourge of human ingenuity. Thus, one of the greatest technological inventions of all time, the Bitcoin Blockchain Protocol, in its current form, may be ill-suited to deal with the protocol’s greatest flaw: human beings.
Code and economics, even in their purest forms have human beings to thank for their imperfections. In code, this is the reason we have bugs and hackers. In economics, this is the reason we have thieves and tyrants. Bitcoin’s big bug is governance. This is because mining centralization amplifies human machinations in an otherwise stable model. Here we sit, as participants in a digital grand experiment of sorts, that rivals humanity’s greatest social experiment, self-government by the people. But in the Bitcoin model, governance ultimately boils down to how much hashing power an initiative can muster.
Among Bitcoin’s hardcore proponents, to include myself, governance is a bad word. By its very nature, Bitcoin is decentralized, fundamentally resistant to a governing authority. But governance and decentralization are not mutually exclusive. In its initial iteration, mining was intended to be the decentralized governance of Bitcoin. Every Bitcoiner a miner (“CPU”), every miner an equal vote. But the invention of the ASIC and the consolidation of ASIC developed chips and software discredited this pure form of voting, ASIC-boost aside.
The Bitcoin governance proposition is no longer a matter of hashing power, is a matter of those who own the means to develop the best Bitcoin mining chip and its underlying software. All others be damned. Without a doubt, BitMain and BitFury hold the keys to Bitcoin’s immediate future. But ask yourself, what happens when AMD, Nvidia and Intel decide to enter the space. These companies have resources that dwarf Bitmain and Bitfury and could bury them under a tsunami of new money. It is not outside the realm of possibilities that the big three (AMD, Nvidia or Intel) could create chips and software that give them an even more outsized lock on the Bitcoin protocol than even Bitmain and Bitfury. Good luck catching up to them. But, more importantly, what a profound change to the Bitcoin proposition their dominance would bring. Not to despair, there are alternatives to this potential future.
The Tetrahedron Model, A Framework for Bitcoin Governance
To chart the future one should understand the present. Models help me understand things so follow me for just a few minutes in a potential model of Bitcoin governance that I call the Tetrahedron Model of Bitcoin Governance. The model is based on the existence of the four, current, primary, interested parties of the protocol: Developers, Miners, Users and Nodes. In geometry, the tetrahedron has a few unique characteristics: it has four triangular faces, six straight edges and four vertex corners. If we were to set the tetrahedron down on one side, it looks like a pyramid. If you can conceive of each point on the pyramid as a interested party in Bitcoin, a natural question might be: who is on top of the pyramid? But I argue, that’s not the right perspective to have.
When a tetrahedron is suspended in space from its four points, every point can be at the top or at the base, depending on your perspective. So, an alternative perspective is that: at all times, all points are at the top and at the bottom of the tetrahedron, so no point or group is truly dominant over all others. Also, of interest about a tetrahedron, if the distance or balance between all of its points is not even, the shape can no longer be classified as a tetrahedron; it loses its character. Thus, it is in the interest of all sides to remain balanced.
Each group has importance to Bitcoin and each group gives value to the ecosystem thus we should consider a governance model that includes all interested parties. If we attempt to resolve the blocksize impasse without solving Bitcoin’s governance problem, it is possible that the community could set itself up for a future fight with even greater stakes, with an even larger network, with more interested parties without a core governance model upon which to rely. Here I argue that a truly balanced approach to Bitcoin governance includes all points of the tetrahedron. Moreover, it provides a framework for future governance issues. So let’s take a general look at the interested parties, why they matter to the protocol and a possible solution to their inject into Bitcoin governance.
Developers (20%)
Who Are They: Generally referenced as “Bitcoin Core” this group of individuals consists of coders who, many pro bono, offer services for maintenance of the Bitcoin network. The frustrating part about the Bitcoin Core Developers is that no one actually decided that they would be the Core Developers, they became the Core Developers by default. A handful of them hold the keys to the Bitcoin Github code distribution stream and are allowed to change what we all know as “Bitcoin.” Ostensibly, no one “controls" the Core Developers meaning that they get to decide on what upgrades they want to work and what ultimately becomes worthy to integrate into the Bitcoin network in the interest of the other parties.
Why They Matter: They are most familiar with the source code of the network and are able to make changes and upgrades to the system to give us things like passphrase access, cleaner wallet interfaces and faster network processing speeds. The Bitcoin Core Developers work through the Bitcoin Improvement Proposal (BIP) process to vet and implement upgrades to the network. As a side note, it is not true to say that Bitcoin has never forked or changed since its inception. Indeed, Bitcoin has had dozens of upgrades since its original release in 2008. Though technically these could be considered “forks,” we Bitcoiners do not call them that because these were non-controversial upgrades to the system that the Developers and Miners collectively agreed were needed. But not all upgrades are non-controversial, vis-a-vis SegWit. This article will not get into the blocksize debate as this subject has been exhaustively explored on the anecdotal level and somewhat explored on the technical level. What is important is that, regardless of the decision by the Bitcoin community, it is the Developers who will be tasked to implement either proposal, a hybrid thereof or perhaps something else.
How They Should Get A Say: To say that the Bitcoin Developers should get a say in the future governance of the Bitcoin protocol is an understatement. It is the Developers upon which other participants in the ecosystem rely to ensure the system is bug-free or at least minimally bugged, that the system keeps up with changes to computational upgrades and that ensure whatever the rest of the community wants, is implemented safely. For this reason, I think that the Bitcoin Developers should be given a 20% stake in the future of Bitcoin decision-making.
A complicated aspect of their voting power is to determine who exactly is a Bitcoin Core Developer; I think that the Miners and Users should get to determine who these individuals are in a 50-50 voting system. To begin, we can grandfather in those individuals who worked on BIPs up to and including the BIP that implements SegWit or the blocksize increase. After that, the Developers can propose one or two additions to the group each year but the Miners and the Users get to vote on these individuals. If the Miners and Users agree, then the new Developers can join the Core Developers, if the Miners and Users disagree then the proposed Developers cannot work on the Bitcoin code, at least, as a part of the Bitcoin Core team and they do not get to vote with the Bitcoin Core Developers.
Each time a Core Developer leaves the group, the remaining Developers should be able to create their own rules to nominate a replacement. That replacement should be approved by the Bitcoin Miners and Users in a 50-50 vote. If the nominated person is approved, they become a part of the Core Development Team; if they are not approved, they cannot compete for the open position again. They will have to wait until the yearly nominations are open or they will have to wait until another seat is opened on the Core Development Team by a departing member.
This setup gives structure and legitimacy to the group of individuals who call themselves Core Developers. The structure is the contractually based system of selecting the Core Developers. And they gain legitimacy by enabling the Miners and Users to vote on the personalities. It only makes sense that the people entrusted to maintain the Bitcoin network are identified and selected by the persons who utilize the network and those who maintain its security and stability.
Miners (50%)
Who Are They: Technically, a Miner could be anyone with the proper equipment and internet connection. There are a variety of internet videos that teach people how to individually mine Bitcoin or how to take part in pools or cloud mining operations. Each variety of mining provides its own presentation to the network with commensurate benefits and drawbacks. Here it is important to understand the presentation of hashing power to the Bitcoin network.
As an individual miner, a person with however much hashing power at their disposal could present themselves to the Bitcoin network. Though it will probably take years of continuous mining before an individual discovers a block on their own, it is possible and the Miner can present individual hashing power to the network if they choose. If the individual takes part in a mining pool, it is not the individual’s hash rate that is presented to the Bitcoin network but rather the mining pool’s. Importantly, in any type of voting system it would be important to understand how the mining pool would divide the voting power between the individual miners. This is a similar situation with Cloudminers who have individual miners that buy hashing power as a part of a larger pool.
Why They Matter: Miners matter because, jokingly, Satoshi said so. But more technically, the Bitcoin protocol builds consensus based on the presentation of valid blocks by the Miner that spends the commensurate amount of power solving an advanced algorithm, receives the Bitcoin block reward and thus the right to attempt to propagate their block across the network on the blockchain. Without the Miners, at present, there would be no blockchain. They use an extraordinary amount of power, measured in watts that generate hashing capabilities for the purposes of the blockchain’s security. They have to pay for that; they are compensated with the block reward, fees and I think, voting power within the protocol.
How They Should Get A Say: The mechanisms for Miners to get their vote is already in place, as represented by presentation of hashing power. In order to validate a block or a new upgrade of the protocol, in most cases, at least a majority of the hashing power must support the change. Arguably, this should be the threshold for miners signaling support of whatever proposals are on the table. But I do not think that Miners should have the final say in Bitcoin protocol adoption, hence my suggestion that they have half of the voting power in the Tetrahedron Model.
In the proposed model, collectively, Miners can choose not to have their votes be binary. If they choose to be binary it will effectively increase the power of their voting block because whatever proposal is on the table can receive 50% of automatic miner support. But smaller miners can become more powerful in the proposed system if they choose a rheostatic voting scheme that allows for gradations of Miners support behind each proposal.
Ultimately, the Miners should choose how their support should be presented based on a vote of hashing power. Ostensibly, the options would be: binary, gates (i.e. 10%, 20%, etc.) or discrete (i.e. 1%, 2%, etc.). Miners should be able to vote on this voting system every anniversary of the BID. Importantly, this voting system ensures that mining power does not equate to Bitcoin protocol dominance by a handful of individuals or organizations.
Users (20%)
Who Are They: Anyone who holds a Bitcoin wallet private key can be called a User because it is only they who can access and use the Bitcoin associated with the public and private keys. Of note, exchanges greatly muddy these waters because not all exchanges give actual access to the private keys of each Bitcoin wallet. Some exchanges like Coinbase allow you to hold private keys as a part of a multi-sig system but not all. Importantly, if the Exchange holds your private keys, then you are not the actual User, the exchange is the User. Only those individuals who hold their own private keys can legitimately be called a Bitcoin user.
Why They Matter: Users give value to the Bitcoin network. Though Miners secure the network and give a technical value to the network, Users provide the intrinsic value to the network. Without Users, Bitcoin would be worth nothing more than a Chucky Cheese Token. Sometimes the Developers and Miners forget that.
How They Should Get A Say: Users should have a voice. But the User voice should not be curated by corporations or governments. There are technical ways to ensure this happens. Each wallet holding at least one Satoshi can receive a vote. For every Satoshi over the single Satoshi in a wallet, the voting power decreases exponentially. This ensures that Bitcoin remains egalitarian and that those holding relatively large sums of Bitcoin are not able to dominate the User vote.
It is possible that individuals with large sums of Bitcoin can create tons of additional wallets and use those to vote. However, they would be responsible for paying the transfer fees for each wallet and they would have to go through the painstaking process of creating and maintaining public and private keys for each wallet then using those keys at the designated time window for voting. It is possible but the “flaw” of Bitcoin’s long addresses becomes a no-kidding “feature” that ensures User voting is not tampered with, at least not too much.
Unlike traditional voting, there will be no accounting date because the blockchain creates the actual accounting point. At the time of voting, all valid wallets can signal a vote for or against a proposal by activating a feature that the Developers can create. The voting feature can only be activated with the private keys of a Bitcoin wallet to ensure that no one tampers with the voting system.
Nodes (10%)
Who Are They: Again, Nodes can be anyone with a computer and an internet connection. These computers present themselves to the Bitcoin network as individual nodes, not as a part of a group of nodes like the Miners do in their pools. Ultimately, anyone with the capital to buy a computer and leave it on the Bitcoin network can become a Bitcoin Node owner.
Why They Matter: Nodes matter because they help validate Bitcoin blocks and propagate confirmations throughout the Bitcoin network. At the very beginning of the Bitcoin network, Nodes doubled as Bitcoin wallets because everyone was required to download the full Blockchain in order to conduct a Bitcoin transaction. Now, wallets are “lite” and do not require downloading the Blockchain. But there are still some individuals who maintain Blockchain Nodes because they are necessary to validate the Blockchain public ledger and because they, essentially, want to validate their own transactions. The more nodes that are active, the greater the confidence the Miners and Users can have that a transaction actually occurred.
How They Should Get A Say: Nodes run computer software and they can signal on the Bitcoin protocol as they validate blocks and transactions. Thus, by signaling for or against something, the Nodes are able to vote. I think a voting system similar to the Miners should govern how the Nodes are able to vote: binary, gates (i.e. first pass the post for certain voting levels) or discrete.
Conclusion
Collectively each group of the proposed Tetrahedron Model of Bitcoin Governance is given a voice within the Bitcoin protocol. This matters because, in the future, there can be few squabbles about the direction of the system, it will be too costly. Any breach in confidence could result in a collapse of the Bitcoin network’s value which is a large part of its draw to the average person. Regardless of whether one thinks Bitcoin is a store of value, a medium of transaction, a cool technological project, something else or all of the above, confidence is something that I think all players can agree is an important facet. And to quite frank, all of the competing ideas about what Bitcoin is … matters. While the general proposal from above clearly is not a perfect solution, it provides a framework to solve Bitcoin’s biggest and least understood problem: governance.
Bitcoin’s First Black Paper?
I argue that we, the Bitcoin community, should use the BID to give confidence to not only those individuals who are already a part of the Bitcoin community but also to those individuals contemplating joining it. I do support the implementation of SegWit but, more importantly, I hope that the Bitcoin community can act on a change in a broken governance model. This post is the first in a series that I hope to ultimately capture in a Black Paper that formally proposes the Tetrahedron Model of Bitcoin Governance.
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