Bitcoin Q&A: Decentralized power, leaderless governance

[AUDIENCE] Makes me think about…
We’re talking about decentralization of control. My understanding of the scaling debate
is that it’s been locked up for three years. A big part of it is a political deadlock. Bitcoin has
those checks and balances within its network, and what we’ve seen is centralization of mining
[and mining equipment manufacture]. We have this issue where one player wants to block
something, like SegWit, because of their own motives. So my question is, do you see this need for an on-chain
governance system, similar to maybe Decred or Tezos, to break these deadlocks? [Do you see] centralization interest within
the network as being a danger point? [ANDREAS] That’s a great question. I think it’s dangerous
to think that Bitcoin doesn’t have a governance system. It does have a governance system, which
holds an “election” every ten minutes. That election decides the greatest difficulty valid chain. Also, it’s the economic activity of all the nodes who
choose that chain based on their validation rules, choose to do transactions on that chain. That involves five constituencies of consensus:
miners, developers, wallets, exchanges, and merchants. Think of it as a 4-of-5 multi-sig. If you try to carve your own path away from
the other constituencies of consensus, you get burned at a rate of about
$50 million dollars a day in terms of losses. People can threaten, pretend, bluff and say they will go
against consensus, but we know how consensus works. What consensus does is it punishes those
who step outside monetarily, very severely. It’s a market-based system of incentives,
and the disincentives are pretty huge. Bitcoin has a governance system. It’s a system
that motivates people to come to full consensus, at very high levels, or [at least] maintain the status quo. What has Bitcoin done for three
years while it has “failed” to scale? An enormous amount of innovation and new protocols,
a much better understanding of how forks work, the development of payment channels,
Lightning Network, Segregated Witness, soft forks, user-activated soft forks
(UASF), miner-activated soft forks, Spoonnets, TumbleBit, and a whole bunch of
other technologies that came out of frustration… with the lack of resolution in the scaling debate. What it also did is prove that no one person, a very
rich person, a person with a lot of silicon hardware, or [a person who was] key in writing the software,
can impose their will on everybody else. It is a system that resists takeover. The problem with the governance models
we see with some of the other systems… is they’re not tested at scale; in order to test the system
at scale, you have to put it in an adversarial situation. You have to [put] a big pot of money
in the middle of the table, and [make] everybody around
the table say, “Whoa, I like that!” There are people in this world who think
about things differently than perhaps I do. I don’t know how many would agree with me here,
but one of the things I love about Bitcoin is… it is a leaderless system,
a system that has no one in charge. Some people think, ‘A leaderless system? Cool!
[Free] expression, autonomy, self-actualisation, wow!” Other people look at [it] and think, ‘You mean there’s a
vacancy at the top? Where can I send [my] application?’ [Laughter] You very quickly see human nature take over
when people like that seek to position themselves… as leaders of the leaderless system. It’s always been a problem, especially with anarchist
communities, where you get all of the anarchists… in a room and then everybody says, “Yeah,
we’re anarchists! Now let’s elect a leader.” [Laughter] “We really need to get organized.” Okay, obviously real anarchists don’t
do that, but they’re few and far apart. Governance in systems like this is tricky.
We know how to do centralized governance. We know how to do representative democracy.
We know how to do elections. These systems allow us to choose between
a number of different governance models. You could have governance models that are
almost purely mechanical and mathematical, unfeeling and hard rules, like
Bitcoin does with Proof-of-Work. You can have systems that are softer,
that have more human representation. Some systems that people suggest are things
like proof-of-stake, where you could vote… based on the amount of money you have. That has its own risks. It’s not a perfect solution. Proof-of-stake systems have a tendency to make the
already-rich richer, and massively increase inequality… between the top percentile and the bottom percentile;
not just the inequality of financial power, but the inequality of decision-making power
that then becomes financial power… that then becomes more decision-making power,
that becomes more financial power. Hey, look! We’ve recreated the old system again.
[Laughter] I’m skeptical of these governance models. I kind of like the status-quo [with proof-of-work].
I think we can make what we have work fine. We just have to be patient and
have the long-view perspective. This [will] happen over a period
of twenty years, [maybe longer]. Over these two decades, the decisions we make today,
the things we accept as participants in this [consensus], the choices we make in our personal lives, which wallets
we run and who we support with our transactions, will make a huge difference
twenty years down the line. Let’s see. I’d like to see more experimentation with
other software platforms like Decred and Dash. If they can do it at $1 billion, I’m interested.
If they can do it at $5 billion, I’m very interested. If they can do it at $30 billion dollars, I’m fascinated. That’s exactly how you test [this]: you put a bigger
and bigger pot of money in the center of the table, and see how long [it takes] before the knives come out. [Usually], all of those hunky-dory, “kum ba yah”
communities descend into name-calling very quickly, when there’s real stuff at stake.
[Laughter] This is human nature. One of the experiences I had was…
Has anyone here run a business with partners? Has anybody here run a business with partners
that suddenly became very successful? What is the lesson you learn? The people
you thought you knew, change overnight. Suddenly, [there is] a lot of money at stake. I had friends who I thought were friends, and
suddenly there’s $1 million sitting on the table. Greed comes in; people you know transform
overnight into people you don’t even recognise. It’s terrifying and it [can] happen to anyone. Governance systems work like that.
Human nature is difficult to fight. Just because we change the way we do money
doesn’t mean we remove human nature. The fundamental problem with cryptocurrencies
is the humans using them. [Laughter] “The system works perfectly on testnet,
I don’t know what you’re asking for!”

28 thoughts on “Bitcoin Q&A: Decentralized power, leaderless governance”

  1. Thanks so much Andreas for being a rock in the bitcoin community, educating us on so well on many issues. You ROCK my brother : )

  2. I think exactly the same way.
    I believe crypto is on its way to replacing normal currency.
    I think it's inevitable.


    Where is the gold that sovereign nations once held, the gold that represented their full authority and financed the victorious allies.

    It was only a few billion dollars worth of gold (in today's money). Now the dollar is becoming worthless.

    So only bitcoin remains.

  3. Wonderful talk. Comme toujours, Andreas.
    Thanks for getting me involved in Bitcoin about a year ago.
    Have you listened to my track "The Age Of Cryptocurrency" yet?

  4. Bitcoin's governance system, is like the political one: you choose it once in a while, but then can't affect its decisions.
    Some newer cryptos have a more flexible one, that allows finer control of individual proposals.
    The systems are not equal.

  5. POS may not be perfect but it's better than mining centralization and the massive energy cost of hardware to maintain consensus versus all that money going into R&D for the technology itself cough EOS

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