Which Majority? Bitcoin Exchange Accord Reveals Hard Fork Dilemma
A newly released statement from major exchanges today may have stoked tensions in the ongoing bitcoin scaling debate – but it also revealed more about how the confrontation is becoming increasingly complex.
Today, nearly 20 exchanges announced that, should a certain developer group take actions that would split the bitcoin blockchain into two competing networks, the network running software developed by Bitcoin Core would retain the ticker symbol ‘BTC’. Bitcoin Unlimited, the alternative option, would then be advertised as ‘BTU’.
Ostensively aimed at preventing customer confusion, the move has already been highly politicized, with some supporters of the Bitcoin Core development team heralding it as the effective end of the Unlimited project and its particular proposal for redrafting bitcoin’s rules.
"Mining pools may signal Bitcoin Unlimited, but this letter makes it crystal clear that the economy won't accept it – the best outcome they can hope for is to have their BTU token listed," former BTCC COO Samson Mow alleged in a statement.
However, to exchange officials, the move is designed not to provoke, but to be forward-thinking in how it safeguards user funds. (A key component of the messaging is that to list the alternative, the exchanges would require a guarantee that users would be protected from attacks).
Further, major exchange representatives are saying that the statement does not mean that they intend to act as decision-makers. Rather, it's that they’re open to having the market naturally settle the issue.
Kraken CEO Jesse Powell told CoinDesk:
"There should be no implication taken that anyone is committed to leaving the BTC tickers with core. At least some would assign that ticker to the longest chain."
As noted by Powell, there remains an open argument over how to decide which of the two resulting blockchains would be the true “bitcoin”, and the role that exchanges would play in what could be a long decision-making.
Miners and the economy
To observers, the debate has now evolved into one in which two communities, miners and the so-called 'bitcoin economy' (exchanges, wallets and developers), could square off to determine the future of the network.
Yet that reality shows that while ethereum and ethereum classic, the most high-profile fork to date, was a divergence of two groups that wanted to go separate ways, bitcoin’s hard fork is predicated on one widely held agreement – that participants only want one bitcoin asset.
“It’s my opinion that those two will eventually be the same,” Michael Perklin, chief information security officer at ShapeShift, one of the announcement's signatories, told CoinDesk.
"Miners will hash the chain that has the economic majority. Users will choose the blockchain that has the most proof of work. Eventually one will win over the other."
Blockstream CEO Adam Back cited historical precedent for this idea, noting that during bitcoin's first halving (in which its rewards declined from 50 BTC to 25 BTC), some miners continued to try to elicit the former level of rewards.
"Unfortunately for them the economic nodes on the network automatically rejected and hid their blocks, so they stopped and rejoined the network," he said.
This time, the fear is that given the ideological lines involved, the process could be prolonged.
Exchange representatives acknowledged that a fork could be a complex process from an operations standpoint, one in which charting and historical data would be disrupted, and costly upgrades would need to be made.
But today’s events also mark a major challenge to the idea that miners have a natural role as decision-makers on the bitcoin blockchain, one that was original encouraged by some developers.
Digging further into this idea, a notable contingent of developers believe that bitcoin’s software was designed with a smaller role for miners in mind. After all, bitcoin’s white paper envisioned that mining would take place on desktop computers, not complex data centers.
This view is perhaps best summarized by support for the so-called UASF, a recent proposal by which the 'economic majority' would drive miners to support opt-in code changes.
If the exchanges, payment processors and nodes that participate in the bitcoin economy commit to supporting a certain version of the software, then miners will have to go along, otherwise they won’t be paid – or so the view goes.
"The economic power is much greater than the mining power, and if you have the economic actors pushing a certain action, the miners are working for the economy," Lopp said.
Mow pointed to a list of companies that support one code change in question, SegWit, as evidence that miners are not supporting what users want.
Bitcoin Core contributor Luke Dashjr went on to describe the roles of the economy and the miners as not pitted against one another, but presented the current debate as a refinement of this understanding.
Miners simply have a specific role to uphold, he contends.
"It's not so much that one follows the other, but that miners are obliged to do what the economic majority decides.’ he said, concluding:
“And if they don't, they cease to be miners.”
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