Bitcoin Is Not A Democracy. Then What It Is?

[SvenBomvolen]

Bitcoin is following for basic principals of the democracy:
1. Equality. Of course, this ideal is fully presented in the Bitcoin Protocol. Unlike Bank money, which, if desired, can be subjected to censorship (as it was with the banking blockade of Wikileaks), bitcoin payments are completely impossible to censor, since these payments do not require a mediator, and literally consist of cryptographically protected information – pure analogue of freedom of speech if you want.
2. Popular sovereignty. Bitcoin literally exists because of the consent of its users; if they don't agree with the rules of the Protocol, they will simply not use it. And this use, in turn, is what gives value to currency. In the end, users of Bitcoin would be nothing more than a source. Moreover, Bitcoin is not just ruled with our consent – it exists with our consent.
3. Autonomy. It can be argued that the organizational structure of programming open-source is certainly the best way for ordinary people to develop their abilities to organize themselves.

[DooMAD]

Bitcoin is none of these things, and thus, can't be compared with them.

Bitcoin is no exception.  Bitcoin's power structure will fall in one of the different classes of standard power structures.  The ONLY possible exception would have been if bitcoin were truly immutable.   If bitcoin turned out to be game-theoretically immutable, it would mean that there is not any power structure that can make its rules.  It would be a "theocracy" where the rules are laid out once and for all by a divinity, Satoshi, and nature would be such that no-one would be able to modify the Divine Rules.  However, we all know that the original rules will hit a hard wall, because of the block size limit.

So in as much as Bitcoin is a theocracy, it will have a Final Judgement Day very soon built into it.

And if ever the rules can change, there will be a power structure that will change those rules, and it will be a human power structure, with people having the power to change them, and others, without that power, which is exactly what an aristocracy is about.

See, this is the part I'm not convinced by.  There are so many people who claim that Bitcoin will either be irreparably damaged or warped beyond recognition if anything at all is allowed to change.  Whether it be something like the blocksize, what they might perceive as the "official" developers suffering a "hostile takeover" or "power grab", or in this instance some sort of sovereign immutability being lost.  But I don't think any of that can change the basic underlying formula that makes Bitcoin what it is.  

The magic formula (IMHO) is as follows:

• Open source code, meaning it doesn't matter who coded it or what their beliefs or motives might be.  As long as the effects of the code are neutral, obvious, stable and bug-free, it doesn't matter where the code originated.
• Users are free to both view the code and to select the code they choose to run based on what rules they believe should be enforced and how that code should govern the network
• The network shouldn't be so resource intensive so as to make it impractical for the average user to run a non-mining full node if they so wish
• The network shouldn't be so congested or have fees so high as to make it impractical for the average user to transact on-chain if they so wish
• The consensus mechanism (and by extension, the alignment of incentives for securing the chain) is never undermined or subverted

There isn't really a single word to describe it yet, but that's what Bitcoin is.  Bitcoin's purpose can be defined as a global network to transfer tamper-proof ownership of digital data without needing a third party.  But what it really is can be defined in those 5 bullet points.

For the duration that all of those five golden rules remain intact, I'm convinced Bitcoin can resist devolving into one of those lesser, "human" archaic and perverted power structures.

It's a Republic.

Honey Badger Republic.  

[JL421]

Bitcoin is undemocratic is a really good thing as most of us can see the case of us how people are treated in the so called democratic country. If it was democratic there would be some vote system and furture development would surely be controlled by those directors while bitcoin is a free agent there is no specific word to what you can call bitcoin

[BitcoinBallerina]

Bitcoin is a monarchy, led by Satoshi and his wife in the shadows.

[stevebc]

Bitcoin is not a Government, or some libertarian or anarchist dream - it's just Bitcoin.

I think of Bitcoin as a store of value (the new gold) with the potential (if we get scaling right) to double as a payment system also.

[Cuber Krypton]

As the first initiative to any change of rules has to come from miners, we can say that the miner pool owners are somehow an oligarchy over bitcoin, but as they are part of a game-theoretical dynamics themselves, I don't know how to call this.  It certainly is not a democracy.  The "speculator/user" part has something of a free market to it.  But only a few people can actually decide to do something, which turns it into an oligarchy, that is, a small set of aristocrats that can potentially change the rules ; however, with a market deciding over their acts.

Although I follow your reasoning and quite like the definition you gave, I have to argue this conclusion. In a censorship free market, you have no barrier to entry. You yourself can choose to be a Miner. This is much different than Oligarchy.

Yes, and no.  On one hand, you are right, in that at first sight, there are no privileged aristocrats that can give the "right to mine", like they give licences to be a pharmacist or a wireless operator, and punish with violence those that try to do that without their agreement.

However, in reality, economies of scale and local subsidized electricity and manufacturing of asics make that there is a *de facto* oligarchy of mining pools, mining producing equipment, and profitable mining business.  Essentially, as a small newcomer, you cannot enter, even though there is no aristocratic RULE with violence that holds you back.  Call that "free market" if you wish.  But if you push this logic to the extreme, then even states are a free market.  After all, how does a state acquire its monopoly of violence over its territory ?  By having an army.  You can then argue that there is no barrier to entry: everybody can set up his own army, compete in the "revolution market", and try to win the de facto violence monopoly, so states are no aristocracies either if you push the logic you advance, to the extreme.

The point is that there is a kind of "winner takes all" system in bitcoin: the block that is won, makes all other competing work on the previous block moot.  Yes, statistically, you can compete with small mining equipment, but in reality, you can't, because there's a collective unique consensus for each block, and there are no "small, local blocks with their own customers".  In fact, that DOES exist, but it is called "alt coins".  Within bitcoin, every block is a winner-takes-all competition.  This is different in a real free decentralized market, where the local bakery can sell bread to the local customer, without a "winner takes all" global competition for each bread that is being sold.

The effective economies of scale that make mining only profitable if it is done in large pools, with large equipment, and with local subsidized electricity and cheap labor, makes that it does lead to a de facto oligarchy, even if that oligarchy is not a "privilege oligarchy" obtained by the direct licensing of the violence monopolist aristocracy.

The fact is, Bitcoin only rewards those who do things efficiently. Not wasting resources in inefficient tasks. This is exactly what a Free Market system does. It directs resources to the most efficient use. Everything else, would just be a subsidy paid by all others.

This is a bit ironic with bitcoin, because bitcoin mining is pure waste.  You get in fact a competition of wasting where the "wasting function" is simply biased.  In bitcoin, you have to abuse the bias in the wasting function to be "efficient" in the way you explain.  Efficient usually means "More utility for the same waste", which is at the basis of the "best allocation of scarce resources".  But in bitcoin, "proof of work" is simply "proof of waste", but the proof is biased.  You can FAKE produce more "proof of waste" in certain circumstances than in others, but the "difficulty attained" is of no economic utility by itself.  Nothing is produced.  You only "proved waste", and some can "prove more waste with less waste" than others, which is the degenerate idea of "efficiency" in this particular case.  If I can get cheaper electricity, and I can build smarter hardware (ASICS), I can fakely "prove" more wasted work than someone else, and I get to win the contest, but nothing more valuable was produced.

This is entirely different from "finding ways to produce cars with less resources".  No, I find "ways to prove more wasted work with less resources", which begs the question.  The proof of wasted work has no utility, contrary to cars that were produced. 

The fact that you can get "economies of scale" and "efficiency advantages" in "proving wasted work" is simply an error in the proof of work function, which only provides a biased proxy to "wasted work", and doesn't prove any direct waste ; if it were, there couldn't be any efficiency differences, by assumption.  Proof of work is (by definition) not useful.  It was only meant as a tool to avoid sybil attacks, and to enhance true decentralization, while it degenerated in exactly the opposite because of the failed design of it.

Again, I understand the reasoning. And effectively, it is true Bitcoin could be much more efficiency optimized. But in following your argument to conclusion, efficiency as you define it (only 100% efficiency) will only be reached by monopoly. I might go on a limb and argue that in a perfect efficiency system, there would be no competition, everyone would just specialize in their own thing. This was not what I was trying to convey.

Each miner that shows profit is showing efficient waste of energy, or as I prefer, efficient deployment of his energy. Calculating efficiency cannot be done on the base of a single block. It's probabilistic.

Furthermore, Bitcoin is global, there is no theoretical need for a "local breadstore" (for the purpose of this argument, please ignore country specific circumstances). If a Global breadstore could send you bread through your mobile phone and do it better than your local home made bread, the market would recognize it and reward it. If the local bread is better, it will get more demand and price would reach an equilibrium and both would compete at different scales.

What you are describing is a protectorate. Effective subsidy. But this is done by Consensus. It's why it is so beautiful. If we all rather have Joey Popcorn get money from mining while watching Netflix and not investing anything significant into the system we can have that. If we all want a Central Bank to take over and be Sheep, we can do it. The beauty is that whatever the Consensus, enforcement is guaranteed.

I personally like what we have now. I would be very interested in hearing a case for a Proof of Work that doesn't equate to a subsidy.

Bear in mind, that I am cutting out outside forces from this picture. I thoroughly understand your arguments in a scenario where Bitcoin is in the real world. China could be subsidizing miners with free electricity and whatnot. The US is probably monitoring exchanges as well as taxing us all with bureaucracy. Broad Spectrum Patents bring barrier to entry and tax us all for no added value. And so forth. But this is not a Bitcoin problem in my opinion, nor is it its task to solve.

I myself, look at Bitcoin as what I think it could be.

[dinofelis]

Again, I understand the reasoning. And effectively, it is true Bitcoin could be much more efficiency optimized. But in following your argument to conclusion, efficiency as you define it (only 100% efficiency) will only be reached by monopoly. I might go on a limb and argue that in a perfect efficiency system, there would be no competition, everyone would just specialize in their own thing. This was not what I was trying to convey.

There is no notion of "efficiency" in "proof of work".  Proof of work is meant to be a proof of wasted economic value.  However, the cryptographic proxy of proof of work used in bitcoin, can let you "prove" wasted economic value with different "fake factors", depending on what you call the "efficiency" of the system: I can give you cryptographic "proof" that I wasted X Big Mac value, while in fact, I only wasted X/10 Big Mac value, because I have more "efficient" proof of work equipment and electricity prices.  So I'm lying.   

Each miner that shows profit is showing efficient waste of energy, or as I prefer, efficient deployment of his energy. Calculating efficiency cannot be done on the base of a single block. It's probabilistic.

But, by definition, there is no "efficient waste of energy".   Think about it.  By definition there's nothing efficient in wasting stuff.  There's no useful product coming out of that waste, contrary to "spending stuff" to "produce value".  Proving waste in itself doesn't produce any value.  It was just a trick to make sybil voting in the consensus protocol somewhat impractical, to keep the consensus protocol decentralized over many users ; and it turned out that this competition in "efficient lying about how much you really waste" actually reduced the consensus protocol deciders to a small oligarchy.

Furthermore, Bitcoin is global, there is no theoretical need for a "local breadstore" (for the purpose of this argument, please ignore country specific circumstances). If a Global breadstore could send you bread through your mobile phone and do it better than your local home made bread, the market would recognize it and reward it. If the local bread is better, it will get more demand and price would reach an equilibrium and both would compete at different scales.

Sure, but then the fungible global bread market would also not be a competitive free market with local inventions, alterations, niches etc... which is the true advantage of the free market: inventivity.  The only "invention" you can do in bitcoin is to "lie somewhat more efficiently about how much proof of waste you can deliver, versus how much actual value you truly have to waste in doing so".  But it is fungible Trabant for all of us.

If we all rather have Joey Popcorn get money from mining while watching Netflix and not investing anything significant into the system we can have that. If we all want a Central Bank to take over and be Sheep, we can do it. The beauty is that whatever the Consensus, enforcement is guaranteed.

But this is what you have.

BTW, the aim of mining is NOT to gain money.  It was to get decentralized consensus by the users.  This is why it failed.  Proof of stake is a much better system in that respect, although proof of stake was hard to start with, as the only staker would have been Satoshi (even though he was also almost the only miner).  The "reward" for participating is in fact the biggest error.  The coin creation and the consensus decision should have been separate.  The fact that coin creation was linked to consensus decision, and hence made consensus decision a profitable business, is exactly what turned bitcoin into an oligarchic central bank.

I personally like what we have now. I would be very interested in hearing a case for a Proof of Work that doesn't equate to a subsidy.

There is no proof of work to be had for consensus.  That was a big mistake.  It is cryptographically stupid, it wastes a lot of resources, and by the erroneous relationship between the work proved, and the value actually wasted (the "efficiency"), it allows for biased competition, leading to centralization.  While it was only introduced to avoid hidden sybil, in introduced "open sybil".  A single mining pool has the "voting rights" in the consensus process of hundreds of thousands of users.  And "proof of work" was introduced to deny sybilled nodes to have any "voting rights" in the consensus decision, so that it would start to be expensive to start up hundreds of thousands of nodes to be able to get, exactly, that voting weight in the hands of a few.  While that is exactly what it accomplished.

The only good use of proof of work is to kill seigniorage and regulate coin emission (instead of a fixed coin number, one could have a fixed proof of work to emit a coin, and hence emit as many coins as people are willing to prove work for it, keeping the value of the coin limited to that wasted value of work and killing all hope for speculation).
But that "printing coins with proof of work" shouldn't give you voting rights in the system, which it does now.  Voting should be done by proof of stake: the stake holders should be the ones voting over the rules, not people  being able to lie over how much value they wasted.

[qiwoman2]

I personally would like to call Bitcoin a FINANCIAL REVOLUTION. Going from centralized to decentralized  is helping the normal Folk get a piece of the money pie that before they could never have a part of. It also is opening the world to better governance and transparency in all affairs and the technology behind Bitcoin can be used for so many different platforms and projects both financial and civil.

[noictib]

I personally would like to call Bitcoin a FINANCIAL REVOLUTION. Going from centralized to decentralized  is helping the normal Folk get a piece of the money pie that before they could never have a part of. It also is opening the world to better governance and transparency in all affairs and the technology behind Bitcoin can be used for so many different platforms and projects both financial and civil.

Yeah , I agree with you , Since in the current time many of the people who don't know about Bitcoin fully are saying that
Bitcoin is a way of the loss of money and responsible for the black money also but the reality is that the Bitcoin is giving us the democracy to use our own money in any possible ways and everything is open to see for anyone , so how can be the Bitcoin is centralised , this is open source like thing where anyone can use at free of cost and having security like military forces  that is about impossible to hack .
Here I will say that nothing is like Bitcoin becauseamy of the banks system are impressed by Bitcoin and now they want use the Bitcoin technology for banking sector .

[Cuber Krypton]

There is no notion of "efficiency" in "proof of work".  Proof of work is meant to be a proof of wasted economic value.  However, the cryptographic proxy of proof of work used in bitcoin, can let you "prove" wasted economic value with different "fake factors", depending on what you call the "efficiency" of the system: I can give you cryptographic "proof" that I wasted X Big Mac value, while in fact, I only wasted X/10 Big Mac value, because I have more "efficient" proof of work equipment and electricity prices.  So I'm lying.   

You are not lying you are incentivized to come up with a more efficient way to get the desired results. In ancient Egypt, Mining Gold with slave labor did not mean the Gold was fake... This are other issues that do not have place in Bitcoin. That is social responsibility and users should enforce it by voting with their money. It is not an inherent flaw of a system.

But, by definition, there is no "efficient waste of energy".   Think about it.  By definition there's nothing efficient in wasting stuff.  There's no useful product coming out of that waste, contrary to "spending stuff" to "produce value".  Proving waste in itself doesn't produce any value.  It was just a trick to make sybil voting in the consensus protocol somewhat impractical, to keep the consensus protocol decentralized over many users ; and it turned out that this competition in "efficient lying about how much you really waste" actually reduced the consensus protocol deciders to a small oligarchy.

Proving waste is a very biased term. Proving Expended Energy in any endeavor is the basis for the decision of the users who vote with their money. If they feel it is best to Expend it elsewhere, they will signal that. This is also not a flaw of the system. It is how a Free System works.

If you want a 100% efficient system, you should try some resource based economy or something of the likes. Where each one specializes in doing only one thing. It doesn't work. People are glad to trade inefficiency for commodity. But this you only discover by pricing.

Sure, but then the fungible global bread market would also not be a competitive free market with local inventions, alterations, niches etc... which is the true advantage of the free market: inventivity.  The only "invention" you can do in bitcoin is to "lie somewhat more efficiently about how much proof of waste you can deliver, versus how much actual value you truly have to waste in doing so".  But it is fungible Trabant for all of us.

I fail to grasp why it would not be competitive? Having fewer suppliers does not mean the system is gamed. This conclusion is only valid when there are regulations in place to protect said suppliers. If there is no competition, it is either because the Monopoly is working at a loss for himself, or noone can beat their efficiency.

But this is what you have.

BTW, the aim of mining is NOT to gain money.  It was to get decentralized consensus by the users.  This is why it failed.  Proof of stake is a much better system in that respect, although proof of stake was hard to start with, as the only staker would have been Satoshi (even though he was also almost the only miner).  The "reward" for participating is in fact the biggest error.  The coin creation and the consensus decision should have been separate.  The fact that coin creation was linked to consensus decision, and hence made consensus decision a profitable business, is exactly what turned bitcoin into an oligarchic central bank.

The goal you mention is only achieved by incentive. Otherwise people would use their computing power for another more profitable endeavor.

Proof of Stake is what we have now in our current debt backed inflationary financial systems. Furthermore, if you untie Bitcoin's value from Energy, or the real world all together, it is none else than a speculative asset. You might as well trade WoW Gold.

There is no proof of work to be had for consensus.  That was a big mistake.  It is cryptographically stupid, it wastes a lot of resources, and by the erroneous relationship between the work proved, and the value actually wasted (the "efficiency"), it allows for biased competition, leading to centralization.  While it was only introduced to avoid hidden sybil, in introduced "open sybil".  A single mining pool has the "voting rights" in the consensus process of hundreds of thousands of users.  And "proof of work" was introduced to deny sybilled nodes to have any "voting rights" in the consensus decision, so that it would start to be expensive to start up hundreds of thousands of nodes to be able to get, exactly, that voting weight in the hands of a few.  While that is exactly what it accomplished.

The only good use of proof of work is to kill seigniorage and regulate coin emission (instead of a fixed coin number, one could have a fixed proof of work to emit a coin, and hence emit as many coins as people are willing to prove work for it, keeping the value of the coin limited to that wasted value of work and killing all hope for speculation).
But that "printing coins with proof of work" shouldn't give you voting rights in the system, which it does now.  Voting should be done by proof of stake: the stake holders should be the ones voting over the rules, not people  being able to lie over how much value they wasted.

This would be a major shift towards what you have in the current financial markets.

You effectively transfer the reward from Energy to Capital. From producing to financing. I do not like it, or I do not understand it. 

[jzale]

Bitcoin is freedom . You can do anything with bitcoin on your own command. You choose what you do with it and control its outcomes.

[Kakmakr]

Bitcoin is a currency, full stop. It is not the tool for political ideals or anti-government sentiments. I agree that some people might think that it can be used to weaken governments or big financial systems, but in all honesty it is just a decentralized currency. You can do with it what you want, but if all the hype is stripped away, you will still be left with a technology that can be used to move or store wealth.

The underlining concept of decision making is based on a democracy, where the majority rule. ^hmmmmmm^

[dinofelis]

See, this is the part I'm not convinced by.  There are so many people who claim that Bitcoin will either be irreparably damaged or warped beyond recognition if anything at all is allowed to change.

The point is not that change is bad because of the fact that it would "warp bitcoin".  The point is that bitcoin is a collective system with a monopolistic rule set: you cannot have different incompatible rule sets in bitcoin, there has only to be one.  Now everywhere there is a monopolistic rule set that can change, it means that there are people that can dictate the changes to the rule set ("aristocrats") and there are people that can't (the "populace").  Only if the rule set cannot change, and is graved in stone, there cannot be an aristocracy. An aristocracy obtains larger-than-merited gains because of their power to change the rules, which allows them to obtain benefit for different reasons:
1) they know the calendar and the kind of change they will impose, and hence have an unfair advantage in the gambling game of speculation
2) they can tie "courts" to them, trading advantageous rules for allegiance
3) they can of course bend the rules to their specific advantages, directly or indirectly
4) they obtain notoriety and celebrity which can be traded again for advantages

Note that in a direct democracy, the "aristocracy" is the majority, which can still crush a minority and take advantage of them.  So even a "fair vote" is a form of aristocracy.  Only when there's no vote at all, you get a level play field and a truly free market, because the rules of the game are known and fixed.  In all other forms of game, some players are also the arbiters, which is maybe a clearer reason of the bias.  You better be in the team that has the arbiter in it.
 

The magic formula (IMHO) is as follows:

• Open source code, meaning it doesn't matter who coded it or what their beliefs or motives might be.  As long as the effects of the code are neutral, obvious, stable and bug-free, it doesn't matter where the code originated.
• Users are free to both view the code and to select the code they choose to run based on what rules they believe should be enforced and how that code should govern the network
• The network shouldn't be so resource intensive so as to make it impractical for the average user to run a non-mining full node if they so wish
• The network shouldn't be so congested or have fees so high as to make it impractical for the average user to transact on-chain if they so wish
• The consensus mechanism (and by extension, the alignment of incentives for securing the chain) is never undermined or subverted

The big misunderstanding in crypto is to think that it is some form of coding.  The coding is just the technical support of a contractual rule set.  The importance of the code is over-estimated.  Imagine that we are thinking about "voting laws" and that we are quibbling over what is the code to be used for the voting system.  The coding is secondary.  What counts is the exact rule set, the agreed-upon contract between the participants in human terms.  The "smart contract" code-is-law is a failure if the code is too complicated to be read and understood by most participants.  Imagine a politician's campaign projecting lines of code and arguing about it.  Silly.   Crypto is not about code or computers, it is about the rule set of a game, rule set that should be simple enough to be understood by most players.   The actual implementation of that rule set should be manifold (no "reference implementation") and decentralized.  Like there are many e-mail clients that all talk "SMTP", but are written independently.

The raison-d'etre of open source is twofold.  One is that you can inspect it and see that it does what it CLAIMS it does.  This is necessary for all cryptographic software.  But the main reason of open source is that you can take it, modify it, and adapt it to your needs.  This is somewhat problematic in a crypto currency, where there can only be one rule set.  Nevertheless, there should be many diversified implementations of that rule set, so that "coders" have nothing to say and have no power position.  It was a big mistake to have a "reference implementation" unless the goal was to not modify it and keep it immutable.

The network's resource intensivity and the will to use those resources or not are to be decided by the free market.  If you think that you gain advantage in spending those resources, then you invest in them ; if you don't think so, or you can't afford them, then don't invest in them.

But the argument for non-mining full nodes is bogus.  There's no need for single users to have them, they contribute nothing.  There need to be SOME full nodes from which you can download whatever partial information you need, and that's it, because those servers cannot lie.  The headers are linked and can be verified by every simple wallet, and the Merkle tree cannot lie either, and is also checked for the necessary transactions by a user by his simple wallet.  Running a full node is a bit akin to downloading the source software and reading it.  Most linux users, me included, have never read the entire linux kernel.  If I want to, that's a huge investment (in time) on my side.  I won't.  Downloading the entire full block chain to "check" it against a rule set is a fun occupation that you can do if you want to but doesn't serve a big purpose:

1) in any case there's no OTHER block chain out there so this is the only one, if you don't like it, there's no alternative
2) miners check them before applying their consensus decision (building on top of it), and as they are the only consensus deciders, you have to accept their decision in any case
3) there's no cryptographic possibility to serve fake pieces of chain as they are all linked together with hashes (between headers, and in the Merkle tree).  If these are correct, then there's no fake data served.

[hatshepsut93]

According to Antony Antonopoulos, Bitcoin isn't a democracy, some people call it cypherpunk or crypto-anarchy, https://youtu.be/TC3Hq76UT5g

I don't think Bitcoin is a democracy - rather it is a flat, network-based, collaborative system of super-majority consensus among five constituencies (users, developers, exchanges, merchants, miners), which makes change very difficult. It is a radical decentralization of power. Some people call the politics of this system "cypherpunk," "crypto-anarchy," and other words we don't yet have.

Is bitcoin a meritocracy?

It is holding of power by people selected according to merit. They wield the power.

Rodolfo Novak: Bitcoin is a true technical meritocracy. Cry/Kick/Scream as much as you like, but if your shitty code & ideas aren't good they wont make it

Is bitcoin a plutocracy?

It is the holding of power by the wealthy, elites.

Is bitcoin anarchy?

It is absence of government and absolute freedom of the individual, regarded as a political ideal.

Democracy, anarchy, plutocracy, meritocracy - it's all political systems, and Bitcoin is not a government or some organization, it's a p2p network, and current political systems do not apply to it with 100% accuracy.

Now, lets look at distribution of power in this network. Miners seem to have the most power, but anyone can become a miner, and miners tend to mine whatever yields the best returns.

Having fiat wealth allows you to influence the price, so this is an element of plutocracy and market capitalism.

Developers dictate the direction of Bitcoin, but anyone can become a developer and release their own fork. This is democracy and meritocracy.

[dinofelis]

There is no notion of "efficiency" in "proof of work".  Proof of work is meant to be a proof of wasted economic value.  However, the cryptographic proxy of proof of work used in bitcoin, can let you "prove" wasted economic value with different "fake factors", depending on what you call the "efficiency" of the system: I can give you cryptographic "proof" that I wasted X Big Mac value, while in fact, I only wasted X/10 Big Mac value, because I have more "efficient" proof of work equipment and electricity prices.  So I'm lying.    

You are not lying you are incentivized to come up with a more efficient way to get the desired results. In ancient Egypt, Mining Gold with slave labor did not mean the Gold was fake... This are other issues that do not have place in Bitcoin. That is social responsibility and users should enforce it by voting with their money. It is not an inherent flaw of a system.

You seem to forget what proof of work was meant for: it was meant to make it EXPENSIVE to do a sybil vote, that is to say, that if "voting entities" (nodes, say) were under the control of one single economic agent, he could only "pretend to be different entities" by suffering more expenses that were truly wasted (that he couldn't recover in any other way, be it useful heat or whatever), so that overwhelming the system with a sybil attack in the consensus voting would become so expensive that it wouldn't be worth it.  Proof of work was hence meant to be a proof of wasted economic value.

Ideally one would have a DIRECT proof of work, in terms of spent value on waste (say, by buying labour at a given salary that is perfectly useless, like digging holes in the morning, and filling them up again in the afternoon).  But bitcoin uses a cryptographic proxy to proof of wasted value, namely the cryptographic proof that one has wasted calculation power.  However, this proxy is of course subject to variable calibration between the actually wanted proof (namely wasted value) and the provided proof (a hash with leading zeros).  The amount of leading zeros is not in a fixed relationship with the amount of wasted economic value.  If you do the calculation with a home PC using domestic electricity, you waste much more resources for a given amount of leading zeros, than if you use large scale installations with specialized hardware, and you use industrial electricity at subsidized prices in specific regions.  So the same "proof of leading zeros" doesn't correspond to the same amount of wasted economic value, and hence, the system breaks down, and fails on its initial premise, which was to make conglomeration of voting power EXPENSIVE ; it actually obtains the inverse result, of making decentralized voting power in the consensus system (which was its AIM) impossibly expensive as compared to conglomerated oligarchic voting in said consensus system.  Where "proof of wasted economic value" was INTENDED to make it difficult for a guy to pretend to be 100 users, we now have only a few guys being able to vote in the name of hundreds of thousands of users and have these hundreds of thousands of users consensus-less.

Proving waste is a very biased term. Proving Expended Energy in any endeavor is the basis for the decision of the users who vote with their money. If they feel it is best to Expend it elsewhere, they will signal that. This is also not a flaw of the system. It is how a Free System works.

No, you are forgetting what proof of work was introduced for: to avoid sybilling of consensus voters, so that each one of the users could use their vote (or at most "a few" votes) but would become too expensive to pretend to be 100 voters.

The energy wasted is not essential.  It is the economic value wasted that was to be a brake on the possibility of a few entities taking all the voting power.  Proof of work was simply a (failed, it turns out) way to keep many people voting, and avoid some to pretend to be entitled to many votes.  It actually did the opposite.

Normally, the system should have been largely resource-less.  Proof of stake is waste less.  Your voting weight in the consensus is equal to your stake in the system.  The cryptographic effort to produce a signature is insignificant as compared to the effort needed to break it (proof of work is the opposite: the cryptographic effort to break it is in fact decreasing as compared to the cryptographic effort to secure it: totally stupid cryptography).

But again, one should separate the consensus voting mechanism (which should be largely decentralized) and the "coin creation mechanism" and its inherent seigniorage.  The fact of rewarding voters has been a paramount error in bitcoin (and most crypto).

I fail to grasp why it would not be competitive? Having fewer suppliers does not mean the system is gamed.

Of course it is gamed.  You get monopoly-like power, and effective barriers of entry (economies of scale, hierarchies of influence, possibility of cartel formation....).  You only have a true free market when the amount of suppliers is near infinity, and the amount of consumers is also near-infinity.  You also only have a true free market when there is variability in the offer.  In a system like bitcoin or any other "fungible" system, that is impossible.  If all car suppliers have to make exactly the same car, and you get only a few car suppliers in the end, the free market fails for two reasons:
1) the actual design of the car that cannot be modified (needs global consensus) is maybe not the ideal one and could be improved, but there's an essentially impossible barrier to make a different and better car
2) the economies made for the waste of resources in production of said car will be eaten away for power games between the few suppliers, on disinformation, propaganda, customer binding and other things.

It is gamed, not because of laws and violence monopolists, but because the power imbalance between the decentralized large customer base, and the centralized and hence much more powerful suppliers that cannot be challenged by diversity in the offering and are protected behind large effective barriers of economies of scale, and other barriers they will introduce to keep their oligarch status (and on which they will waste the possible economies they could have made).

[Cuber Krypton]

We can make another post so we can discuss End Game Theory, because it is becoming an interesting discussion.

Anyway, what you say is not correct in my opinion.

A Free Market doesn't mean endless suppliers for the same task. It just means anyone can try and outperform another with no barriers.

This in fact, always tends to a Monopoly or Cartel. Always. We should cherish monopolies in an unregulated business. Meaning, in a non protected endeavor. Not like Microsoft and their 1Billion Patents. That is a foul Monopoly.

A real Free Market Monopoly comes from providing the most efficient services. And is only ever created by user choice. Choice is encompassed and guaranteed in Bitcoin, so it cannot be gamed.

If you ever have a Monopoly, if said Monopoly doesn't want to lose its status, it has to abide by the user base and the economic majority. Because if ever they try to impose, any user can just put together the software to fork it. And if Mining is profitable, for sure there will be volunteers to replace said Monopoly, and for sure the Economic nodes will also be on board. The choice is always with users. They can dump the foul chain for the healthy one. And the Monopoly Miner's only choice is either to abide by the users or buy his own coins back and try and ICO to recoup the losses.

The losses of losing a Monopoly of Bitcoin Mining, are more than the Profit the Monopoly would make. This is why I feel it is so well designed and incetivized. And it is very easy to overthrow a Monopoly.

This is because Bitcoin has real choice, real ownership, and noone is under ransom. Legal Tender bars you from choosing. Otherwise everyone would get paid in Gold.

[deisik]

According to Antony Antonopoulos, Bitcoin isn't a democracy, some people call it cypherpunk or crypto-anarchy, https://youtu.be/TC3Hq76UT5g

I don't think Bitcoin is a democracy - rather it is a flat, network-based, collaborative system of super-majority consensus among five constituencies (users, developers, exchanges, merchants, miners), which makes change very difficult. It is a radical decentralization of power. Some people call the politics of this system "cypherpunk," "crypto-anarchy," and other words we don't yet have.

Is bitcoin a meritocracy?

It is holding of power by people selected according to merit. They wield the power.

Rodolfo Novak: Bitcoin is a true technical meritocracy. Cry/Kick/Scream as much as you like, but if your shitty code & ideas aren't good they wont make it

Is bitcoin a plutocracy?

It is the holding of power by the wealthy, elites.

Is bitcoin anarchy?

It is absence of government and absolute freedom of the individual, regarded as a political ideal.

Bitcoin is an obvious case of plutocracy

Users as such are irrelevant. Those who are just idly sitting on their coins in their personal wallets are irrelevant altogether since these coins are effectively not existing (for decision making and power struggles), and therefore they can be safely discarded. Users who are actively trading their stashes give their voice to exchanges which act on their behalf. The same basically pertains to merchants since they are not involved with Bitcoin in any meaningful degree because they get rid of bitcoins as soon as they get them (via exchanges or payment processors, which are basically the same exchanges). Developers could be counted toward meritocracy (with a lot of reservations) but they are essentially a tool in the hands of those who pay them, so they are out of the equation as well. In this manner, it all comes down to groups representing miners on the one side and exchanges on the other. Note that it is only a conceptual distinction, i.e. it doesn't mean that the miners are enemies of the exchanges (things are obviously more complicated than that). It should pretty evident that between these groups the financial muscle plays the most important role

[dinofelis]

Proof of Stake is what we have now in our current debt backed inflationary financial systems.

No, you are thinking again in terms of mixing coin creation and voting consensus.  I'm talking about proof of stake to vote, but without any reward.

BTW, there's nothing wrong with a debt backed inflationary financial system, but that's another discussion.   The problem of our financial system is not so much the fact that it is debt backed, or that it is inflationary, but rather that it is regulated, and that there are privileged actors (that not everyone can be a central bank for instance).

Furthermore, if you untie Bitcoin's value from Energy, or the real world all together, it is none else than a speculative asset. You might as well trade WoW Gold.

But that is exactly what it is.

It is an error to think that bitcoin is backed by waste.

[dinofelis]

Bitcoin is an obvious case of plutocracy

Users as such are irrelevant. Those who are just idly sitting on their coins in their personal wallets are irrelevant altogether since these coins are effectively not existing (for decision making and power struggles), and therefore they can be safely discarded. Users who are actively trading their stashes give their voice to exchanges which act on their behalf. The same basically pertains to merchants since they are not involved with Bitcoin in any meaningful degree because they get rid of bitcoins as soon as they get them (via exchanges or payment processors, which are basically the same exchanges). Developers could be counted toward meritocracy (with a lot of reservations) but they are essentially a tool in the hands of those who pay them, so they are out of the equation as well. In this manner, it all comes down to groups representing miners on the one side and exchanges on the other (note that it is only a conceptual distinction, i.e. it doesn't mean that the miners are enemies of the exchanges). It should pretty evident that between these groups the financial muscle plays the most important role

Amen.  And this is due to the proof of work consensus mechanism.

[Cuber Krypton]

Proof of Stake is what we have now in our current debt backed inflationary financial systems.

No, you are thinking again in terms of mixing coin creation and voting consensus.  I'm talking about proof of stake to vote, but without any reward.

BTW, there's nothing wrong with a debt backed inflationary financial system, but that's another discussion.   The problem of our financial system is not so much the fact that it is debt backed, or that it is inflationary, but rather that it is regulated, and that there are privileged actors (that not everyone can be a central bank for instance).

Furthermore, if you untie Bitcoin's value from Energy, or the real world all together, it is none else than a speculative asset. You might as well trade WoW Gold.

But that is exactly what it is.

It is an error to think that bitcoin is backed by waste.

What is proof of stake to vote other than substituting Work for Capital and how does that equate for less centralization but rather, different centralization? Also, without reward, aka Transaction fees, or punishment, how do you incentivize following consensus?

Furthermore, if you do reward it, does this not decrease the rate at which money is exchanged thus rendering it less useful and less valuable, since all of its value comes from its utility and there is a reward in hoarding?

Please enlighten me. (I am not being ironic).