Who Sets the Rules of Bitcoin as Nation-States and Corps Roll In

“Little by little, and then all at once.”

That’s how people go bankrupt, of course. But it’s also a fair description of bitcoin’s ascendance from radical experiment to widely used technology. Recall, if you dare, that in March 2020 BTC was trading at about $5,000 per token and had been in the doldrums for years. Then COVID-19 lockdowns juiced boredom-driven day trading and increased interest in crypto, ultimately unleashing a string of transformational moments for Bitcoin. Those included the big BTC buy by Tesla, integration into Twitter, high-profile legislative debates in the U.S., a record-setting stadium name deal and national adoption in El Salvador.

This article is part of Future of Money Week, a series exploring the varied (and sometimes weird) ways value will move in the future.

The arrival of nation-states and tech corporations in Bitcoinland is a huge, positive milestone. Twitter and El Salvador are directly exposing new mass audiences to crypto usage instead of just speculation. Because bitcoin is more useful as more people use it (the “network effect”), these moves also increase the appeal of future integrations. Major corporate buys, meanwhile, open the door for more institutional investment and legitimize bitcoin’s inflation-hedge thesis.

But those new players also bring new risks – arguably risks of a sort the world has never before seen. An array of centrally run, sometimes very powerful entities now have vested interests in the design and growth of a system they all share. History suggests their interests will, sooner or later, diverge, and that some will try and change bitcoin to their liking.

They will find the system used to propose and execute changes to bitcoin is barely a “system” at all. Unlike a company or a national government, the Bitcoin blockchain doesn’t have a formal leadership structure (with one debatable exception). Instead, as developer Gavin Andresen put it in 2015, Bitcoin’s design and evolution “really comes down to, what code are people running, and how influential are the people who are running the code?” In other words, Bitcoin upgrades are largely a matter of persuasion.

So what if Twitter or Tesla or Germany decide that they want Bitcoin to be something else? With enough money, with courtrooms and jails, with an army division or two, could they force their vision on the most powerful stateless entity on the planet?

Why change Bitcoin?

We got a preview of such a conflict in the so-called “Blocksize War” of 2015-2017, recently chronicled in an excellent book by Jonathan Bier. In very broad strokes, the conflict was between entities, including companies like BitPay and Coinbase, that advocated for larger “blocks” of transactions to increase the network’s speed. They were opposed by “small blockers,” who warned that increasing the block size would make it more expensive and difficult to run a Bitcoin node, threatening the system’s decentralization and, ultimately, its resilience.

The Blocksize War is an important episode when considering the future of Bitcoin, because it illustrates both the motives and methods that we might see replayed on a still larger scale. In this case, the motives for big blockers were largely commercial. Businesses like BitPay needed more throughput to turn bitcoin into a coffee-cup currency. The other side of the debate, at least in Bier’s telling, was made up of people prioritizing long-term stability and what we’d now call the “store of value” model, even if it meant bitcoin transactions stayed fairly slow.

As bitcoin becomes a more important component of the world’s financial infrastructure, it’s not hard to think of other motives for changing the way it works. Perhaps a surveillance-obsessed Western government will push for a change that threatens pseudonymity. Miners might aim to increase their fees as block rewards decline. A coalition of authoritarian regimes might seek to add native geofencing. Or, if you want to get really crazy, imagine a populist uprising circa 2050 agitating to remove Bitcoin’s 21 million coin-supply cap.

Some of these scenarios are more realistic than others. But their mere possibility is probably news to many bitcoin holders and users.

“It’s safe to assume that 95% of people have no clue how [Bitcoin] upgrades work,” says Jackson Wood, a financial adviser who works with crypto. “They’re 100% taking it for granted that it just exists and will always be the way it is. But if consensus rules on Bitcoin, literally anything can change.”

The tangled layers of Bitcoin governance

Various kinds of decision-making mechanisms hold sway over different aspects of bitcoin.

On a day-to-day basis, the combination of proof-of-work mining and blockchain database sequencing determines which transactions are valid and which aren’t. There are at least two well-known forms of technical attack that could interfere with these “on-chain” rules, but they have limited potential. Though it’s financially impractical at this point, an entity willing to spend many millions of dollars to rent bitcoin mining rigs could theoretically conduct a 51% attack on bitcoin, giving them the ability to manipulate a small subset of transactions.

The other purely technical attack would be a “hard fork,” or software change, in which an alternate version of Bitcoin is released and promoted to miners. But previous Bitcoin forks show how difficult it is to gain adoption for a divergent Bitcoin: Dozens if not hundreds have faded into obscurity. Even a relatively successful fork like Bitcoin Cash, which emerged from the Blocksize War with a large, built-in constituency, has fallen far behind Bitcoin.

“Governance” of a blockchain system, though, more often refers to how these consensus rules themselves can be changed. Very broadly, Bitcoin takes its fundamental development and administrative structure from the open-source model through which unaffiliated developers collaborate on software like Linux. Bitcoin’s source code lives on Github just like that of many other open-source projects. Literally anyone can debate Bitcoin’s future, and even propose specific changes – though actually getting traction for your proposal is a much bigger challenge.

The most direct approach for an entity hoping to reshape Bitcoin, then, would be “putting in pull requests on Github and suggesting code changes that go in that direction,” says Pierre Rochard, a longtime Bitcoiner on the product team at Kraken.

But in practice, if the changes went against broader community sentiment, this would be basically impossible.

“What they would run into is that Core has a tremendous amount of peer review,” says Rochard. “Even small changes require two or three reviewers who have experience and somewhat of a reputation to get merged [into the reference client]. And then big changes that would affect consensus rules, those receive just a tremendous amount of scrutiny – both from developers and from interested laypeople. And it’s not based on votes, it’s somewhat based on reputation.”

In practice, this nebulous, reputation-based approach boils down to a web of protracted debates at conferences and online, across message boards like r/bitcoin, Telegram and Twitter. This swarm approach means changes are slow. “It took forever to get [recent Bitcoin upgrade] Taproot approved,” observes Wood. “It was months and months and years of debate.”

In an abstract sense, you can compare that interminable and open-access debate to the “proof of work” in Bitcoin’s on-chain transaction rules. Just as a block of transactions can’t be approved on-chain if a miner hasn’t taken an economic risk in certifying it, a Bitcoin upgrade that arrives without a paper trail of months and months of rhetorical free-for-all would be instantly flagged as suspicious.

Rochard believes that this crowdsourced scrutiny will grow along with the rising stakes of Bitcoin design. “Even though we’re at a different scale than 2017, I see Bitcoin’s governance pattern as a bit of a fractal. Even as the scale increases, we’ll see the same patterns play out.”

Bitcoin also has one key difference from Linux or Open Office that makes any non-consensus change difficult: Bitcoin does not have an automated upgrade system, or even an automated notification of an available upgrade. Miners instead have to manually install new versions of the client.

So even if someone successfully meddled with the Core Github, they would have to publicize the new version to get nodes to upgrade – at which point the non-consensus change would be exposed. It would then, most likely, be reversed, thanks to one of the last lines of defense against malicious Bitcoin code: a rollback.

“Even if the consensus is wrong, if all the core developers start acting crazy – there’s nothing saying a group of people couldn’t jump up and say, ‘Let’s go back to how it was before,’” says Wood. It wouldn’t necessarily be an easy or smooth process, but in the face of an existential threat to Bitcoin, such a rollback would be an invaluable lifeline.

Just Core things

Not everything in Bitcoin is so decentralized, though. Only a handful of individuals scattered around the world have what’s known as “commit access,” or the ability to merge proposed changes into the Bitcoin Core reference implementation. This group of maintainers was created by Gavin Andresen, who was essentially handed the reins to Bitcoin when pseudonymous founder Satoshi Nakamoto stepped away in 2011. As described by Andresen in 2015, he picked two trusted collaborators and, with them, picked two more. Other maintainers have since left or been added, largely based on demonstrated commitment and contributions to the project.

This group has sometimes been regarded with suspicion because of its perceived power. But the job is far less glamorous or influential than it appears.

“In Bitcoin, maintainers are very much janitors,” says Rochard, tasked, for instance, with removing spam from the repository. “They understand the backlash that would happen if they were to make a decision, so they’re very loath to do that. They only merge things when there’s a rough consensus among frequent contributors, rather than themselves making a controversial call.”

This was cemented as far back as 2014 with the handover of the lead maintenance role from Andresen to Wladimir Van Der Laan. Andresen has said that he was more willing to be something of a benevolent dictator in the early days of Bitcoin, but Van Der Laan explicitly renounced any actual decision-making power. Van Der Laan himself stepped back from responsibilities earlier this year, and signaled that he wanted even more decentralization of the maintenance role.

The upshot is that even if a powerful organization used bribery, blackmail, or other means to subvert one or more maintainers with commit access, they would make little headway in actually changing Bitcoin without the backing of broader consensus.

“There would be alarm bells,” says Rochard. “How did this get merged in?” Rochard says there has been at least one instance of a maintainer accidentally merging code that hadn’t been vetted. It was swiftly caught and undone.

Governance into the future

The strange, emergent, arguably chaotic status quo of Bitcoin’s decentralized governance appears, for now, to make it highly resistant to hostile takeover. Amazingly, governments and other potential meddlers seem to have gotten the message.

“If you had some sort of Washington-corporate alliance that wanted to make Bitcoin a transparent chain, guess what? They would have fought Taproot,” says Alex Gladstein at the Human Rights Foundation, who advocates for Bitcoin as a tool against authoritarian governments. “But there was no organized resistance to Taproot. We’re just not seeing it, which is good.”

But not everyone is sure that the open-source scrum will be enough to keep things running smoothly forever.

“As much as we say this is decentralized, there are humans behind it,” says Merav Ozair, a blockchain-focused finance professor at Rutgers. “Someone has to write the software. It shouldn’t be at the hand of one developer, or a small group. We should have a long-term, bigger audit.”

To that end, the nonprofit International Association of Trusted Blockchain Applications (INATBA), where Ozair is an adviser, is developing a proposal for a European Union committee to monitor Bitcoin code and interface with governments. Such a committee would have no formal role in Bitcoin governance, but, over time, could build up legitimacy and community influence.

Ultimately, that sort of transparent bid for influence seems to be the only plausible way to “attack” Bitcoin: joining in the debate about its design, and building up a reputation for sound thinking. You might say that the best way to successfully infiltrate Bitcoin governance – maybe the only way – is to actually do the work of making the system better.