One of the most distinctive features of Nakamotoan cryptocurrencies is the “governance” mechanism. The so-called “consensus” process is modelled after open source software projects, allowing code to fork into alternative, often inconsistent and incompatible, versions. Users are free to choose which alternative version to use, and when to transition from old to new versions. For that matter, users are free to ignore bug fixes or other changes, and, if necessary, create their own “fork”.
The patriarch of the dysfunctional Nakamotoan cryptocurrency family uses this procedure. Changes to the core Bitcoin code are released, and users (developers) pick them up or not, as they see fit. In many cases, the changes are backward compatible, which means that you can still operate using the old code even if you don’t implement or turn on the new code. (In other cases, it may be possible to run multiple versions of the code, though that gets tricky if it means multiple inconsistent blockchains.)
As any software engineer will tell you, this approach is highly problematic. Users/programmers/managers generally don’t want to spend effort updating code, even if it is necessary to do so. And some changes may have negative effects for some users, so there is motivation to reject changes that damage your business.
In short, if you wait for everyone to voluntarily upgrade, you may wait a long time. A very long time. For example, the upgrade from IPV4 to IPV6 (generally agreed to be critical to the survival of the whole Internet) has been in progress for decades, and still is not even close to completed.
This is not an abstract problem for Bitcoin. After much hoohaw and software development, upgrades intended to help scale up Bitcoins performance (SegWit) were released in early 2018. After than, developers and operators must pick up the new code and turn it on.
As Christine Kim reports for Coindesk that, one year down the road, less than 50% of Bitcoin nodes have upgraded .
Whatever you think of this particular upgrade (it looks like a bag-on-the-side to me), it certainly does little good if no one uses it. So, what is going on?
For one thing, the changes aren’t generally visible to end users (or investors), so it is easy to put it off. For another thing, there is a lot of code out there than needs to change to adopt SegWit, and there are higher priorities for programmers and funders. (It doesn’t help any that the changes seem to be really complicated compared to the purpose. And the release actually contains several unrelated changes, in an all-or-nothing package.)
There are people who strongly oppose aspects of the changes on philosophical grounds. For instance, it introduces some kinds of “malleability” to transactions, which is anathema to fundamentalist Nakamotoans. Some operators have sought to ignore transactions that use the new protocol – effectively splitting the network on ideological ground. Survivable, but hardly an ideal situation.
In true Nakamotoan fashion, the upgrade contains financial incentives, intended to entice adoption. However, it appears that the overall economics isn’t compelling, at least not yet.
And, of course, there are a variety of competing upgrades and variations on the theme. If one SegWit upgrade is good, then multiple alternative upgrades must be better, right? If you expect me to explain all these permutations, you’ll be waiting a long time. I haven’t a clue. And neither do a lot of other people.
Overall, the situation is chaotic and unpredictable. Will this benighted upgrade ever be completed? What about other upgrades in the pipeline? How much chaos can Bitcoin stand? I mean, at some point things get so fragmented that it is difficult to even define what “Bitcoin” is or is not.
I’m not sure why anyone thinks this is a reasonable governance model for software engineering. Decentralization has its merits I suppose, but Nakamotoan “consensus” is a terrible way to make decisions about software, especially software that is in use, and in use primarily for financial transactions.
Bear in mind that Bitcoin is the oldest, most used, and probably the best engineered of all the cryptocurrencies! Many Nakamotoan cryptocurrencies have the same hopeless governance model. This is not how you want the financial infrastructure of the world economy to be maintained.
This sort of thing is why Bitcoin is a perennial on the short list for Crypto Tulip of the Year.
- Christine Kim (2019) One Year Later, What’s Holding Back SegWit Adoption on Bitcoin? Coindesk, https://www.coindesk.com/one-year-later-whats-holding-back-segwit-adoption-on-bitcoin