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Bitcoin: Where is the Governance?

A few days ago I wrote a piece on Bitcoin. It is quite an elegant system, really. Since I wrote that original post, I’ve been thinking about how it might evolve… and have run into an interesting failure mode…

Where is the Governance?

I have been involved with the Internet Engineering Task Force (IETF) for many years. In the early years it had a very simple governance structure. There was a group, the IAB, that was pretty much the decision makers. Everyone else were but advisors to the folks on the IAB (I’m not expanding the acronym on purpose). This structure worked fine because the members of the IETF had a lot of respect for the members of the IAB, they were the technical and moral leaders of the organization. And, the governing body, the IAB, pretty much had the consent of the governed (the IETF). All was happy in network land.

Sound familiar.

Then in 1991 the IAB made a very unpopular decision. I’m not going to argue the merits of the decision, or even discuss what it was. But suddenly, the governing lost the consent of the governed and chaos ensued. In the end the entire governance structure was redone and different individuals wound up in leadership roles. But there wasn’t billions of dollars at stake either!

Today Bitcoin feels a lot like the pre-1991 IAB/IETF. Bitcoin claims that it is a decentralized system, but it isn’t really. The ultimate centralization is in the GitHub repository that stores the source code of the reference Bitcoin application. Governance is exercised by commits to this repository. Those commits can have a large impact on the system. For example a recent commit changes the transaction fee from 0.0001 BTC to 0.00001 BTC. Effectively reducing the transaction cost by a factor of 10. The change was made for good reason and most people involved in Bitcoin probably believe it is a win. Yet it means that a certain amount of money, previously destined for Bitcoin miners, now won’t go to them. However they probably don’t care that much. The fees in question are much less than the block reward, effectively noise.

Yet, the system was changed. A commit to that GitHub repository can completely change the way Bitcoin works. It can create winners and losers. It can create big winners and big losers!

So what happens when a decision is finally made by the “core devs” that is not popular with a significant fraction of the community? I don’t know. However I suspect that Chaos is in the offing. And billions of dollars are at stake. Is it really a feature now that Bitcoin is beyond government? Think about it.

Comments:

From: Thotheolh

Are there better ways to re-build *coins (Bitcoins, Litecoins .. whatever_coins) ? To me, Bitcoins is now considered "corrupted"  due to the fact that so many "Central Bank" wannabes start their own exchanges or "banks" when the original idea for Bitcoins specifies it being supposedly decentralised apart from the Github codes. Linux have the same architecture where Linus himself holds the official kernel codes for Linux and everyone else pulls from him if they agree with his build. If the variables like transaction fees in the system would not affect the entire protocol and allow individuals to agree their own transaction fees, it would allow people to fork their programs, create their own coins and make them inter-operable somehow.

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