Tuesday, May 29, 2018

Hard-forks and governance on the Bitcoin blockchain

By Jeffery Atik
The recent experience of forks and potential forks in response to the various Segregated Witness and blocksize increase proposals highlights the nature of governance on the Bitcoin blockchain. The result of the SegWit / blocksize controversies has been a so-called hard fork on the Bitcoin blockchain, producing two varieties of Bitcoin with a common history but now distinct technical characteristics: Bitcoin and Bitcoin Cash.

The Bitcoin blockchain marks a novel form of social organization. There is no central node in the network, no center of authority directing or coordinating internal or external action. Rather, the constituent autonomous nodes operate the Bitcoin blockchain following a downloaded open-source protocol that Bitcoin’s mysterious founders initially developed and which is quite resistant to change. When change does come to the Bitcoin blockchain, it emerges from loose and informal constellations of various stakeholders. Bitcoin users and the sponsors of the Bitcoin network nodes (known as ‘miners’) are formal stakeholders. Indirect stakeholders include Bitcoin developers and businesses that service the Bitcoin ecosystem (systems operators and equipment manufacturers, as well as Bitcoin exchanges). Still we can draw a black box around the Bitcoin blockchain and examine it as a finite social space, an organization set apart from surrounding players and institutions.

The Bitcoin blockchain resorts to “Nakamoto consensus” as its ultimate form of governance. Nakamoto consensus is an emergent and diffuse consensus arising among the active Bitcoin miners, each pursuing its own advantage while collectively engaged in maintaining, verifying and expanding the blockchain. Nakamoto consensus is the ultimate source, and hence authority, as to the canonical state of the Bitcoin blockchain; this consensus is the Truth as far as the Bitcoin blockchain is concerned, and once reached, it cannot readily be disturbed. More considered consensus engages on those occasions when the Bitcoin blockchain community makes a constitutional decision as to changes to its basic rules.