The political structure of Bitcoin

[cjp]

The recent discussion about the founding of the Bitcoin foundation made me think that we need more clarity in the discussion about power and decision-making within the Bitcoin ecosystem. In my view, Bitcoin, like any system of human interaction, allows people to exert some degree of power over each other, thereby reducing their liberty to some degree. This basically happens whenever the consequences for one person's life are not (just) the result of that person's own actions, but (also) the result of another person's actions. I tend to judge systems by their ability to continuously minimize this reduction of liberty.

So far, Bitcoin seems to do a very good job. However, even the best systems in history have shown to be vulnerable to decay into less liberal systems, and if the same is true for Bitcoin, we need good education and continuous vigilance to keep the system as good as it is now. Therefore, I'd like to explore how Bitcoin works politically, as opposed to its technological or economical functioning, which is discussed a lot in other threads.

To kick off the discussion, I'd like to draw an analogy between Bitcoin and a familiar political system, the representative democracy:

Bitcoin	representative democracy
miner	voter
pool operator	representative
hashing power	number of votes
software developers	policy writers
Bitcoin foundation	large body of policy writers, receiving donations from industries and listening to the opinion of industries

These are some of the "policies", which are encoded in the software, and on which people vote:

• How large is the block reward for a given block? (basically block reward = inflation = property tax)
• Which transactions are accepted and which are rejected? (currently based only on input correctness and correct transaction balance, but could be based on anything, e.g. AML policies)

Now that we have some experience where the monetary policies of representative democracies can bring us, I think it's important to be aware of the similarities between that and Bitcoin, both in strength and weakness. What do we need to keep the Bitcoin system from decaying?

[Rothgar]

There is no vote on the block reward.  It's determined before the first hash.

The minors don't "vote" on which transactions to accept.  Each minor chooses to accept a transaction or not.  There is no need to have a majority. 

[Atlas]

It works as-is. We need no additions or power structures.

[jgarzik]

This is incorrect.

Bitcoin client users vote by accepting or rejecting P2P network transactions to relay and include in blocks.  Each bitcoin client validates the block chain independently.  This is why bitcoin is decentralized.

Miners have power to include or exclude transactions in blocks.  Thus, a super-powerful miner may DoS the network by excluding all transactions, but they cannot change the rules.

The collective will of the bitcoin clientbase dictates the rules for validating blocks and transactions.

[hazek]

I think drawing any analogies from our current political system to Bitcoin is a fallacy and allow me to show you how:

Bitcoin

representative democracy

Not true, a democracy is a system where the majority sets the rules everyone is forced to obey. No one is forced to obey Bitcoin's rules, you can simply change them and use your own on your own fork.

miner

voter

Not true, a miner is a validator, just like any other user who runs a Bitcoin client. If miners were really voters than those who'd vote differently would be forced to follow the majority's rules and yet I just explained anyone is able to create a fork with their own rules they wish to validate.

pool operator

representative

Not true, representatives' obligation is to represent their constituency, pool operators have no such obligation to anyone, they merely offer a service anyone is free to purchase or not.

hashing power

number of votes

Not true, because as I explained mining isn't voting therefor hashing power isn't the number of votes.

software developers

policy writers

Not true, policy is a rule enforced on all, software developers are merely writing software code anyone can chose to use therefor they do not write policy and cannot be policy writers.

Bitcoin foundation

large body of policy writers, receiving donations from industries and listening to the opinion of industries

Not true, since there are no policy writers, there can be no large body of policy writers. However it is an organization - a layer on top of the code that is the core Bitcoin protocol - and offers a service this community is free take advantage off or not.


One more time, no one is forced to do anything in Bitcoin which is basically why you can't draw a single valid analogy with a system that at it's core does exactly that.

[FreeMoney]

Merchants decide what they value. Miners can create whatever non-Bitcoin blocks they want but merchants won't want them at all. Miners are employees not voters if you need an analogy.

[Stephen Gornick]

Bitcoin	representative democracy
miner	voter
pool operator	representative
hashing power	number of votes
software developers	policy writers
Bitcoin foundation	large body of policy writers, receiving donations from industries and listening to the opinion of industries

That does not include the absolutely most important entity -- the entity which gives a bitcoin any value whatsoever.  

Which entity is this?   The party that is willing to give up something of value in exchange for a bitcoin.

Only through consensus from the economic majority do any of the others matter.

In other words, the miners, pool operators, majority of hashing strength, software developers and the Bitcoin Foundation can do whatever they want.  But if "their" blocks are rejected by the economic majority, they have no power.   Period.

So the economic majority comes from those who have bids on the exchanges.  And also the merchants willing to trade goods and services for bitcoins.  And the over-the-counter traders and investors willing to exchange their cash for coins.  etc.

[fellowtraveler]

Bastiat wrote:

Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.

What, then, is law? It is the collective organization of the individual right to lawful defense.

Each of us has a natural right — from God — to defend his person, his liberty, and his property. These are the three basic requirements of life, and the preservation of any one of them is completely dependent upon the preservation of the other two. If every person has the right to defend even by force — his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right — its reason for existing, its lawfulness — is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force — for the same reason — cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.

Such a perversion of force would be, in both cases, contrary to our premise. Force has been given to us to defend our own individual rights. Who will dare to say that force has been given to us to destroy the equal rights of our brothers? Since no individual acting separately can lawfully use force to destroy the rights of others, does it not logically follow that the same principle also applies to the common force that is nothing more than the organized combination of the individual forces?

If this is true, then nothing can be more evident than this: The law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.

A Just and Enduring Government

If a nation were founded on this basis, it seems to me that order would prevail among the people, in thought as well as in deed. It seems to me that such a nation would have the most simple, easy to accept, economical, limited, nonoppressive, just, and enduring government imaginable — whatever its political form might be.

[cjp]

It works as-is. We need no additions or power structures.

I definitely don't suggest to deliberately add power structures, I just want to identify power structures that are already present, and maybe identify power structures that could emerge in the future if we aren't careful. I want to introduce some critical thinking against the religious belief that Bitcoin is perfect and will always be what it is now even if we don't guard is carefully.

Maybe my idea about "voting on policies" becomes more clear if you try to imagine what would happen if some disagreement on these policies emerges within the Bitcoin community. As a simple example, let's imagine that

• a part of the community thinks the block reward should never be halved
• this fraction of the community implements their opinion in a patched version of the Bitcoin software
• they connect to the Bitcoin P2P network and start mining with their own software
• If I understand correctly, this will create a block chain fork
• Depending on which fraction has the hashing power majority, one of the chains becomes longer (in terms of total difficulty)

Now I'm not sure whether the Bitcoin software always selects the longest chain, or whether it selects the longest chain which it considers to be valid (only contains valid transactions & so on). Of course, different clients could behave differently even on this point. The first system would give a "winner takes all", just like traditional democratic government systems, while the second system would "fork the currency"; being roughly equivalent to a country splitting into two smaller countries whenever there is a major disagreement.

@ Hazek 08:58:36 PM:
Please scan your post for all occurrences of "force", "enforce" and similar words. It sounds a bit contradictory to me, but maybe I don't understand. If "a miner is an enforcer", then what does he enforce, and upon who?

Like most analogies, mine is not perfect, but I still think there are many similarities. To clarify it a bit further:
If a piece of Bitcoin software is computer-encoded policy, then pool operators can vote for or against that policy by using or not using that piece of software. Non-pooled mining is like a direct democracy, where miners vote directly for / against policy (here, policy is whatever software the miners themselves decide to use). Pooled mining is like a representative democracy, where the pool operator is the representative, and miners vote for him by joining the pool. I don't know the exact details of how pools typically operate, and this may be different for different pools, but I can imagine that some decisions are made by the pool operator and some are made by the individual miners.

About the decision on the economical value of Bitcoin: I think this is not different from any other economic item. In that sense it's not different from dollars, euro's, gold, chickens, computer memory, or even from non-scarce items, such as copies of publicly available information. I think value is subjective, and is a matter of individual belief and/or trade-off; nobody can force you to value something in a certain way.  Of course it might be possible in a non-free market that somebody forces you to perform a transaction that goes against your belief of the value of the exchanged items. If you think such forced transactions are possible in the Bitcoin system, that can be part of the discussion in this thread.

[cjp]

I think I have more or less clear what the "Bitcoin monetary policy" decides: it decides the distribution of purchasing power within the Bitcoin community. For instance:

• Block rewards increase the fraction of bitcoins "owned" by the miners who received them, thereby increasing their purchasing power and reducing others' purchasing power
• if all of someone's transactions are being blocked by miners, the blocked person effectively has no purchasing power. Currently this happens based on whether you can create the "scriptsig" for an unspent transaction output, but any criterium could be used in theory.
• If the block chain forks because of a disagreement, "old coins" give their owners purchasing power in both new communities, while "new coins" might only give purchasing power in one of the communities
• When more people join the Bitcoin community, the total productivity of the Bitcoin community grows. The consequence of this is that an equal fraction of the Bitcoin purchasing power corresponds to an increasingly large value in terms of other items

I think the current policy is quite reasonable, although in my opinion the block reward should not be reduced to zero(*). I think it is possible to change this policy into nearly anything in the future, if there is consensus about it: look e.g. at the introduction of P2SH. The question is: which parties need to work together in order to create a policy change?

(*) since I'm afraid that it will bring mining difficulty, and hence security of bitcoins, to zero as well. I consider it fair to have a small "property tax" to give to those who protect your property. Anyway, that's another discussion; please consider this to be a small clarification of my personal opinion; discussing it further in this thread would be off-topic.

[jgarzik]

Adding new features or policies can and does happen.  See, e.g. BIP 34, which adds the block height to the coinbase transaction found in each block.

Minor feature changes that do not cause a hard fork are feasible.  Anything that requires a hard fork requires major software upgrades and major community consent.  An intentionally high barrier.

[misterbigg]

A lot of good responses in this thread especially from Hazek, fellowtraveler, and S. Gornick.

But people are totally missing the point here. The problem is not with the software or the protocol, the existing workflow and approval process already works spectacularly well. Thanks to all the developers and testers who have been working away on that!

The problem comes when a small group of people take it upon themselves to be the "face of Bitcoin" and start speaking for the rest of the community. Do they speak out against Silk Road? Do they condemn political extortion attempts? Do they comment on the thefts and fraud? Do their answers reflect on everyone's opinion? These are the real issues.

[BkkCoins]

I think today like many of us the OP is trying to figure just where the power flows thru Bitcoin - an attempt to assess just what the Foundation means and where it is vulnerable to abuse. I wholly agree with trying to get this out in the open so we all know what can cause what and with who's consent.

[unclescrooge]

Representative democracy, you mean that thing that works so well right now?

No, thank god bitcoin is not a democracy.

[hazek]

The problem comes when a small group of people take it upon themselves to be the "face of Bitcoin" and start speaking for the rest of the community. Do they speak out against Silk Road? Do they condemn political extortion attempts? Do they comment on the thefts and fraud? Do their answers reflect on everyone's opinion? These are the real issues.

Why would that be a problem? This small group of people has decided to offer a service, we are not forced to pay. We can pay, or we can pay their competitor or we can keep our money therefor we, each of us, have the power.

I think, although I dislike how the foundation is governed (corporate + founders = always majority), I still think it's ok for them to offer this service. As long as the code remains open source, as long as miners remain independent and as long as users pay attention and stay vigilant before downloading any new version of the Satoshi client, Bitcoin Foundation can only benefit Bitcoin.

[The_Duke]

As long as the code remains open source, as long as miners remain independent and as long as users pay attention and stay vigilant before downloading any new version of the Satoshi client, Bitcoin Foundation can only benefit Bitcoin.

Wow, that is quite some conditions, some of which I feel are guaranteed not to be met. (Especially the ones relying on users).

[hazek]

As long as the code remains open source, as long as miners remain independent and as long as users pay attention and stay vigilant before downloading any new version of the Satoshi client, Bitcoin Foundation can only benefit Bitcoin.

Wow, that is quite some conditions, some of which I feel are guaranteed not to be met. (Especially the ones relying on users).

I'm sorry to break it to you but there is no system that will fight and protect your personal sovereignty for you. You have to do it yourself.

[benjamindees]

The Inflatacoin trolls will never give up.

[The_Duke]

As long as the code remains open source, as long as miners remain independent and as long as users pay attention and stay vigilant before downloading any new version of the Satoshi client, Bitcoin Foundation can only benefit Bitcoin.

Wow, that is quite some conditions, some of which I feel are guaranteed not to be met. (Especially the ones relying on users).

I'm sorry to break it to you but there is no system that will fight and protect your personal sovereignty for you. You have to do it yourself.

Ok, thanks for that total irrelevant comment, I'll log it away.

Basically what you are saying is that the only way this bitcoin foundation can benefit bitcoin is if all bitcoin users pay good attention and guard themselves against abuse by the foundation of its "powers".
Sounds like a great start for the foundation! 

[Technomage]

This is incorrect.

Bitcoin client users vote by accepting or rejecting P2P network transactions to relay and include in blocks.  Each bitcoin client validates the block chain independently.  This is why bitcoin is decentralized.

Miners have power to include or exclude transactions in blocks.  Thus, a super-powerful miner may DoS the network by excluding all transactions, but they cannot change the rules.

The collective will of the bitcoin clientbase dictates the rules for validating blocks and transactions.

+100

The OP is stupid and ignores the user completely. The userbase is, in fact, in total control over Bitcoin. This will apply even after the "Bitcoin Foundation". The users can simply start Bitcoin 2.0 with a different structure if they wish, at any time.