Changing Bitcoin, Part III — The Future

If you’ve read the first two installments of this series, you’ll be aware that Bitcoin is very hard to change. And the bigger the change, the harder it is. In fact, the hardest change coincidentally called a hard fork, is, for all intents and purposes, impossibly hard. You’ll know, from part I, that there is no actual formal process to change Bitcoin and that the last three times changes were proposed, each played out very differently. The first, Segregated Witness, led to a prolonged and painful virtual war, often called the Blocksize War. The second, Taproot, was delayed for a long time due to the shared trauma of the Blocksize War.

The third, CheckTemplateVerify, failed to be adopted when it was attempted. From part II, you’ll also be acquainted with the fact that there are many changes being discussed at present — including another attempt at activating the prior third proposal. All these proposed changes represent different approaches to pursuing the same goal. That the goal they all share is to make the features that make Bitcoin so unique and special — its trustlessness, self-sovereignty, and self-custody — available to many more people than is currently possible while doing so without compromising the other essential features that underlie Bitcoin — such as decentralization, permissionless ness, unsuitability, and the like.

But what of future changes? Will Bitcoin reach a maturity where changes are no longer necessary? Or could it reach a stage where changes become ever harder, eventually attaining a state where change is impossible?

And would this be good or bad for Bitcoin and Bitcoiners? That’s what we’ll examine together in this article.

Swan Private Insight Report #34

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Bitcoin: An Unbreakable Agreement

Bitcoin is an extraordinarily unique agreement. Because of its uniqueness, it could also be described as strange. What makes it so strangely unique? We’ll get to that shortly. Let’s begin first with the nature of agreeing.

The Difference Between Informal Agreements, Contracts, and Bitcoin

It’s hard to get two people to agree on almost any arrangement. It’s harder for them to stay in agreement as time passes and things change. Coming to and staying in agreement becomes exponentially harder when we increase the number of people involved and as more time passes.

Contracts are also known as agreements. They are special types of agreements — legally binding ones — which means they are enforced by the legal system: courts, judges, and other enforcement arms of the government. But enforcement of legal contracts doesn’t mean that the terms of these agreements cannot be violated. Instead, it means that if the terms are violated, the parties to the contract can seek remedies after the fact in the legal system.

Our civil courts are full of examples of cases in which various parties to an agreement fell so far apart that they now need the authority of a judge and the skills of lawyers to resolve their disagreement.

Bitcoin is also an agreement, but it is not a contract. Everyone who runs Bitcoin software enforces the rules of the agreement and checks that everyone else who uses Bitcoin is abiding by its rules. The rules are expressed in the Bitcoin code base. Buying some Bitcoin, running a node, or mining it is an expression of agreeing to and accepting its rules. It means your coins, your node, or your rewards will adhere to the rules of Bitcoin.

However, Bitcoin doesn’t require that you sign a contract or check a box agreeing to its terms and conditions. It offers no contract to sign. It has no lawyer-drafted terms and conditions. No court in the world is ever asked to judge if some party broke Bitcoin’s rules.

What makes Bitcoin special and unique is that it is an agreement whose rules cannot be broken. There is, therefore, no need for courts, judges, or lawyers. The rules are self-executing and self-enforcing. Everyone can check every action taken on the Bitcoin network, and everyone who runs a node does, in fact, check every action — before it is executed! Any attempt to take an action that breaks any of Bitcoin’s rules is automatically rejected, without being permitted to be taken!

All the agreements we are familiar with that came before Bitcoin indicate how the parties ought to conduct themselves and what will happen if they conduct themselves in a manner that contradicts the rules set out. But Bitcoin isn’t concerned with oughts. Its code describes what you can do, and you simply can’t do anything that it does not allow.

The tens of thousands of nodes spread out all over the world are a worldwide “jury of peers, ” judging every attempted action before it is permitted to be taken. They are neutral and objective. If an attempted action is in compliance with the rules of the agreement, it is permitted. If it is in violation, it is rejected without being allowed to take place. There is therefore no need for legal enforcement to remedy violations of Bitcoin’s rules.

The rules simply cannot be violated.

The Future of Bitcoin

While typical agreements (and contracts) become harder to enforce as more people join them and as more time passes, the opposite is true of Bitcoin. The enforcement of Bitcoin’s rules actually hardens as more people join in. The more economic nodes there are, the more people there ensure that the rules are never broken. The more energy that getsdedicated to mining, the harder it becomes to ever change a record in the blockchain. Since changing Bitcoin’s rules requires a near-consensus of users, what will happen as Bitcoin continues to add users and resources, all of which make it harder and harder to achieve a change?

The simple answer to this suggests that it will get harder and harder to change Bitcoin.

To Agree or Not to Agree, That Is the Question

A more important question to answer, however, is, “What will the necessary and sufficient conditions be for a change in Bitcoin’s rules to take place?”

Consider for a moment (from Part I of this series) that even when Bitcoin was a much younger project with a much smaller user base, most of whom came from only a few disciplines, convincing everyone of the merits of a change still was a very difficult task.

Back then, change led to some people “forking-off, ” which amounts to leaving Bitcoin, or exiting the agreement. (There is no rule in Bitcoin forbidding anyone from leaving it. Anyone can come and go as they please.) Ultimately, in the cases of those who left, they paid a steep price for doing so, because their coin ended up being worth less than 1% of what Bitcoin was worth, while also failing to attract enough participants to make it relevant.

Those long-term consequences of that “forking-off” experience serve as a tremendous discouragement to anyone taking such steps again. This focuses people who want rule changes on attaining the necessary consensus to change those rules (unless it simply gets them to give up on the idea of changing Bitcoin).

Satisfying Technical Requirements Will Be Insufficient — Social Requirements Will Be Necessary

In the future, things will be even harder. Technologically speaking, nothing will change regarding what’s needed to effect a change:

1. The proposed change will have to solve a real problem.

2. It will have to be technically audited to ensure that it did not introduce vulnerabilities or bugs into Bitcoin.

3. Miners will have to agree to enforce the new rules (simultaneously when some activation conditions are met).

4. Node operators will have to support the activation on their nodes.

5. Mere holders and users of Bitcoin will also have to be largely in agreement, for if they weren’t, there would be the risk of them running opposing nodes or of them leaving Bitcoin and damaging its value and efficacy as money for all users.

But that list is just a “technical” list of requirements. As an agreement between very many human beings, satisfying all these technical requirements will have many prerequisite social requirements that are non-technical:

1. Will the overwhelming majority of people in Bitcoin agree that the problem is real and worthy of solving? How will their agreement be achieved1⁄4

2. Will the non-technical people involved in Bitcoin, who will then be a huge majority of the user base, believe (i.e., trust) the assurances regarding vulnerabilities that the auditors are making?

3. If mining becomes much more decentralized than it currently is, will the same supermajority (95% or more) of miners be able to be persuaded to activate a change?

4. Will node runners be able or interested in becoming sufficiently informed to decide whether or not to implement the changes?

We can see that the technical considerations for a change will not be achievable without first meeting the social considerations: agreement, belief (or trust), persuasion, interest, and involvement.

These social requirements may seem similar to conditions to win elections in a democracy. But Bitcoin is not a democracy. Changes to Bitcoin are not like democratic elections where no matter how small a voter turnout there is, the majority of votes cast wins the election. In Bitcoin, any node runner or miner who doesn’t make a change is, by default, voting for the status quo — for no change.

And, unlike democratic elections, Bitcoin isn’t “majority rules” either. For a chance to win approval and become implemented, it needs the overwhelming support of all the interested and affected parties. As Bitcoin grows in the number of its participants, it’s not hard to see how change becomes harder and harder.

Indeed, a cynic (who might refer to themselves as a realist) might argue that changes to Bitcoin will become impossible as the number of participants grows. Some have argued that we may have already crossed that threshold — that Bitcoin is too big to change. Some people are quite satisfied with this, or at least begrudgingly accepting of it. The fancy word used for “no longer being able to change” is ossification.

And yet Bitcoin can never be formally ossified. It is always true that if the technical requirements in the first list above are achieved, Bitcoin’s rules will change in accordance with the proposed changes at the ordained time. There is always hope.

Necessitating Cooperation — A Breakthrough in Forming Agreement

On the surface, it may seem hopeless to be able to attain the agreement required to modify the agreement that Bitcoin is. However, such an attitude actually reveals much more about the damage our current systems of government, money, and the courts have done to our ability to generate agreement.

After all, our courts generally rely on an adversarial system of rivalrous parties that do not seek agreement and do not require it. Our democracies are adversarial rivalries where there is one winner in each election, and the rest are losers. Both of these are competitive and not cooperative systems. And our money system is one where the rules are shrouded in mystery and are anything but clear, consistent, and unbreakable. So, it is not at all surprising that many people might feel that attaining agreement on such a large scale as Bitcoin will require will be impossible.

Necessity is, however, the mother of invention. Bitcoin imposes upon us the necessity to come to agreement — cooperatively — to make changes to what is becoming the biggest agreement in the world.

For those seeking change, it will not do to divide the populace and try to eke out a slight majority to make changes in Bitcoin. It will not do to fool a sizable portion of the populace to enact a change in Bitcoin. In fact, any rivalrous, divisive approach to enacting change increasingly becomes a dead end.

Instead, Bitcoin requires that we change it through togetherness, through understanding, through agreement, through honesty. It is a huge social project wherein the little guys cannot be ignored if they are making a valid argument, and where the big guys cannot steamroll over others if their desired changes are not in the interest of the whole.

This is an approach to effecting change that we do not see much of in the world today. But it’s going to become a necessity. And that means that we will, in fact, change to rise to the occasion. It may take lots of time. It may take plenty of failures of trying to force through changes unsuccessfully through division or deception. But, eventually, like all innovation and invention, some enterprising people will realize what is needed and will pioneer getting it done.

Successfully changing Bitcoin will require dialog that seeks to bring forth understanding. It will require listening. It will require empathy. It will require patience. These are all virtues human beings are undoubtedly capable of exhibiting.

Outside of Bitcoin — in today’s adversarial systems of government, contracts, and money — our incentives to develop these virtues are absent. Instead, the incentives reward divisiveness, deception, rivalry, immediate satisfaction, and character assassination of others. It should be no surprise that those vices — those vicious characteristics — are what we see develop in our society and its leaders. And we pay a huge price for this. That price is living in an increasingly vicious society.

Fortunately, as Bitcoin grows, it necessitates an enlightenment. It necessitates that we cooperate honestly and truthfully, with consideration of a wide variety of interests, and with long-term focus. It turns attacks on our rivals into dead ends. It turns viewing other human beings as rivals into a dead end.

Many people consider Bitcoin’s end state, the stalemate under rivalrous conditions, to be a good thing. “It’s not perfect, but it’s better than any alternative in which some powerful people abuse their power, ” they say.

I would argue that this view is shortsighted, and, understandably, a result of the dark times we have been living in, believing that adversarial rivalries are unavoidable and inevitable conditions. However, with the benefit of discovering a system that necessitates cooperation and honesty, enlightenment is demanded.

History shows us we are, in fact, capable of all these virtuous traits. This may become one of the greatest benefits that humanity receives from the invention of Bitcoin — a system whose incentives encourage virtue and punish vices. Bitcoin will change our lens of what it takes to succeed in pursuing change itself. It will change the type of people who rise to positions of leadership and influence. It will change the tactics people use to achieve change. It will change the people.

There’s a very popular saying in Bitcoin that states:

“You don’t change Bitcoin. Bitcoin changes you. I think it’s very close to the mark.” 

I would modify it to say:

“To change Bitcoin, we must first change ourselves, for the better.”