I’ve a piece in today’s Financial Times about the political fights racking the Bitcoin community.
Bitcoin, the decentralised, mainly digital currency that is neither issued nor guaranteed by central banks, has always seemed like a magic trick. … Radical libertarians have desperately wanted to believe in it … Politics disappears and a combination of technology and cryptographic proofs is conjured up in its place. Unfortunately, the magic is wearing off. Some of the technological innovations associated with bitcoin will stick around. The political project will not. … As more people have started to use bitcoin, the system has grown more unreliable.The problem is that coming up with a fix requires political agreement. Because there is no centralised authority within bitcoin, there is no one who can impose a mandate. … This free-for-all demonstrates the main problem of technological libertarianism. It does not escape politics but temporarily displaces and conceals it. … The apparent value of bitcoin depends on a suspension of disbelief. It is hard to see how the illusion can work when the magicians are punching each other out on stage.
NB one error which crept in (completely my fault) during the editing process: “protocols to make the blocks bigger so that more bitcoin are released at one time, speeding up transactions” should just read “protocols to make the blocks bigger, speeding up transactions.” NB also, more interestingly, this piece by Ben Thompson at Stratechery, which I wish I’d seen before writing my own, especially since it has a couple of lovely and apposite quotes.
When the block size debate was first heating up last summer, Bitcoin Core developer Gregory Maxwell put his finger on the philosophy of Bitcoin issue … What I found most interesting, though, was what Maxwell stated in the previous paragraph:We’re talking about tuning one of the fundamental scarcities of the Bitcoin Economy and cryptosystem — leaving the comfort of “rule by math” — and venturing into the space of political decisions.
Maxwell has made similar comments elsewhere, including in this forum thread:The rules are Bitcoin. The stability of Bitcoin’s rules is the soundness of the currency. If the rules can be easily rewritten against the will of some users by others according to political whim then what can be trusted? Is the supply fixed? Will coins be confiscated and awarded to others? If that gate is crossed then there is almost always some excuses which is “good enough” — as was lamented in some of Bitcoin’s earliest announcements…
I think governance is incredibly hard and that the development history of fiat currencies shows that mankind is ill-equipped to create a strong and sound system via human governance — not through lack of trying, but because mankind is fundamentally not cut out for it: there is always some excuse that makes people feel justified in compromising the property rights of some for the benefit of (potentially many) others. Bitcoin was specifically created and promoted to replace that kind of subjectivity with machines, but it can’t do it if we go around undermining it.
I find this perspective fascinating, and for reasons that have nothing to do with the block size debate (which again, I’m not stating an opinion on!). I can certainly see the allure of a system that seeks to take all decision-making authority out of the hands of individuals: it’s math!
The problem, though, is that the consequence of embracing this sort of “Them’s the rules” philosophy is itself the sort of political statement that Maxwell is so eager to avoid. After all, in the case of the block size, the implication of not changing Satoshi’s “rules” is to limit the number of transactions and support the “Bitcoin is digital gold” worldview. If humans made the rules, then appealing to the rules can never be non-political. Indeed, it’s arguably worse, because an appeal to “rules” forecloses debate on the real world effects of said rules.
This is a nice illustration of the urge behind Bitcoin (and Hayekian theories of central banking, and much of the literature on incentive compatible mechanisms) – to replace politics with all its messiness, with some neutral and purely technical system. For better or worse, the politics are always just moved somewhere else, and always sidle back in. I had a bit in the original draft about how when you keep on trying to stuff rabbits into a hat, sooner or later they start eating their way out. The metaphor’s a bit too purple, but the point stands, I think.
Also, and changing the subject a little: two way pegging. Has there ever been a more unfortunate technical term? (nominations welcome in comments).