Bitcoin: Decentralized governance put to the test

Source: American Institute for Economic Research
by Max Gulker, PhD

“Bitcoin’s system of radically decentralized governance is facing perhaps the biggest test in the digital currency’s history. As my colleague Patrick Coate described, the code used to run Bitcoin’s blockchain database needs to be updated to transmit more information faster. However, there are two major proposals on the table for how to change the code. The controversy has raged for months and may even result in Bitcoin splitting into two currencies. Many of Bitcoin’s greatest strengths come from its decentralized nature, but if there were somebody at the center of its network making decisions, the current problem would look very different. The governing body would choose one path, and those who didn’t like it could sell their Bitcoins. This structure would resolve the uncertainty much faster, and not result in a split that would likely scare off some potential Bitcoin users. The decentralized structure of Bitcoin is not, alas, a free lunch.” (05/16/17)

https://www.aier.org/research/bitcoin-decentralized-governance-put-test

  • dL

    hmmm, link to this a further illustration for Chuck Moulton?

    http://independentpoliticalreport.com/2017/05/arvin-vohra-an-open-letter-to-justin-amash/#comment-1600340

    One thing to keep in mind is that these differences are not occurring in a vacuum. Certainly, resistance in part to things like Bitcoin, Inc and/or Bitcoin Unlimited is rooted in participants being very much grounded in libertarian notions of political economy.*** “Firm Innovation” would likely come w/ the price of a regulatory expropriation and capture. Somewhere down the road it is easy to forecast the likes of Bank of America “buying” Bitcoin, Inc and rolling bitcoin into the state regulatory framework. Lots of suspicion of Venture Capital, Inc in the bitcoin community.

    So, if the context was a free libertarian industrial economy as opposed to the liberal political economy that we actually operate in, I don’t think we would be seeing the same splits/debates we are seeing now.

    Personally, I’m for Core, and I’m fine w/ paying the higher transaction fees to avoid confirmation hell. (1) I don’t deal in micro-payments (2) i already pay very high transaction costs(~15%) to convert currency to bitcoin. There are other transaction costs on top of that. For me, it is an attitude of add the miner’s fee to the freakin bill. But I could see where the high transaction fees would a roadblock for micro-payments.

    *** I always chuckle at people who claim libertarianism was some unknown thing until recently. Bullshit. Libertarianism has been a core understanding of cypherpunk for decades.

    • I guess it depends on what you use Bitcoin for and what you want to see Bitcoin used for.

      In my opinion Bitcoin must be a medium of exchange that’s usable in daily commerce of the “grab a hot dog and a soda” variety if it’s going to fulfill its potential (and probably, over the long term, to thrive/survive at all).

      • dL

        “grab a hot dog and a soda”

        yeah, but I already have credit cards, debit cards and cash to easily do that. While I might concur that ease of daily routine transactions is maximizing its potential, subordinating it to a regulatory control to achieve that destroys its raison de etre…just another payment method to buy/sell what the state permits. Big whoop…

        • Who said anything about subordinating it to a regulatory control?

          I want a cryptocurrency that is well-suited, by reason of very low processing fees and very low clearing times, for use in small transactions of the kind that billions of people make multiple times every day.

          If Bitcoin becomes a mere store of large chunks of wealth for occasional big moves, it will continue to be traded only among a few enthusiasts. And it won’t be traded among them for very long. Its price/value will plunge asymptotically toward zero as it fades into the status of old fad.

          There are other desirable aspects of a cryptocurrency, too. One of them, which Bitcoin does not do particularly well without extra work, is the preservation of privacy/anonymity with respect to who has it, and who is sending it to and receiving it from whom.

          • dL

            Who said anything about subordinating it to a regulatory control?

            Well, that is the concern of what would be the eventual result of bitcoin hard forks to become a large-scalable transaction mechanism.

            I want a cryptocurrency that is well-suited, by reason of very low processing fees and very low clearing times, for use in small transactions of the kind that billions of people make multiple times every day.

            billions people making multiple times a day is a bit too high a figure RE: payment card transaction. Roughly on order of 10^4 transactions/sec. And the transaction fees are typically borne by the merchant, applied to the merchant account and average ~3%.

            Card payments are a scalable transaction machine, but they are not low processing fees. Keep in mind: those payments are also reversible.

            An example of my most recent bitcoin send:
            120mBTC
            miner fee: .42mBTC

            That transaction fee is minimal(.35%). Particularly in comparison to the transaction costs of currency to bitcoin buys and tumbling costs(~10% + 2.5%). And I see no way to circumvent having to pay the latter costs b/c of the state.

            IMHO, a large-scalable transaction mechanism w/ near zero transaction costs operating outside the state regulatory purview is a unicorn.

          • So 864 million daily transactions in one form (payment cards). Then there are all the transactions in cash. I don’t think that “billions” is a bit too high an estimate of daily transactions on the “pump some gas, buy some chips, grab a gallon of milk” level.

            I want a cryptocurrency that keeps transaction fees below the current debit card norm and that clears as fast. I don’t think that’s a unicorn.

          • dL

            Then there are all the transactions in cash.

            Cash doesn’t require any verification…apples and oranges comparing to electronic payment systems. Although still have to generally pay ~3% fee to get cash out an ATM.

            I want a cryptocurrency that keeps transaction fees below the current debit card norm

            Generally, miner’s fees are below card payment fees. Merchants(receiver) pays the fees in card payment system…sender pays the fees in crypto.

            and that clears as fast.

            Confirming against double-spend probably means crypto is always going to be slower than card payment systems

          • “Cash doesn’t require any verification…apples and oranges comparing to electronic payment systems.”

            Um … so? My specifications were:

            “I want a cryptocurrency that keeps transaction fees below the current debit card norm and that clears as fast.”

            Cash meets both requirements.

          • dL

            Cash meets both requirements.

            Cash is not a crypto currency. It may or not incur debit card like fees to use(e.g, ATM withdrawal fees). Also potentially huge opportunity costs incurred relying on cash to shop.

          • I know that cash is not a cryptocurrency.

            I want a cryptocurrency that is as close as possible to cash in terms of transaction costs and clearing speed. Privacy/anonymity is a third consideration that cash also tends to serve well.

            Those are my priorities. That is what I’d like to see Bitcoin or some other cryptocurrency achieve.

            High transaction fees and/or long clearing times make a cryptocurrency either a high-end wealth movement tool, or an interesting toy.

          • dL

            Yeah, and I think that is unicorn as long as the state is around. The community will fork before that happens b/c of the concerns I’ve outlined. IMHO…