The invisible politics of Bitcoin: the crisis of decentralized governance infrastructure

The invisible politics of Bitcoin: the crisis of decentralized governance infrastructure

Primavera DeFilippi, Klein-Berkman Center for Internet and Society, Harvard University, USA

Benjamin Loveluck, Télécom ParisTech (Université Paris-Saclay) and CERSA (CNRS-Paris 2), France, [email protected]

Published: September 30, 2016 DOI: 10.14763/2016.3.427

summary

Bitcoin is a decentralized currency and payment system that aims to eliminate the need for trusted third-party intermediaries.

It relies on a peer-to-peer network and cryptographic protocols to perform the functions of traditional financial intermediaries, such as validating transactions and maintaining the integrity of the system. This article explores the political economy of Bitcoin in the light of a recent debate that has divided the Bitcoin community over a seemingly simple technical question: whether to increase the Bitcoin block size.

By looking at the socio-technical structure of Bitcoin, the article distinguishes between two different coordination mechanisms: governance through infrastructure (through the Bitcoin protocol) and management of infrastructure (managed by developers and other stakeholders in the community). The invisible politics inherent in these two mechanisms are then analyzed, which together reveal a highly technical power structure. On the one hand, as an attempt at self-governance and self-reliance, the Bitcoin network has a strong market-driven approach to social trust and coordination that has been directly embedded in the technical protocol. On the other hand, despite being an open source project, the development and maintenance of the Bitcoin code ultimately relies on a small core of highly skilled developers who play a key role in the design of the platform.

Citations & Publication Information

Reviewed: June 17, 2016 Published: September 30, 2016

License: Creative Commons Attribution 3.0 Germany

Competing Interests: The author declares that there are no competing interests that could have influenced the text.

Keywords: Bitcoin, Blockchain, Peer-to-Peer (P2P)

Citation: DeFilippi, P. & Loveluck, B. (2016). The invisible politics of Bitcoin: The governance crisis of decentralized infrastructure. Internet Policy Review, 5(3). DOI: 10.14763/2016.3.427

This article is part of Conducting Internet Governance: Practices, Controversies, Infrastructures and Institutions, a special issue of Internet Policy Review.

introduction

Since its inception in 2008, the Bitcoin project's grand ambition has been to support direct monetary transactions between nodes on the network by creating a decentralized payment system that does not rely on any intermediaries. Its goal is to eliminate the need for trusted third parties, especially central banks and government agencies that are prone to corruption.

Recently, Bitcoin's community of developers, investors, and users has experienced a major governance crisis - a situation where divergent interests could put the entire project at risk of failure. This governance crisis reveals the limitations of over-reliance on technological tools to solve problems of social coordination and economic exchange. Using the Bitcoin project as a case study, we argue that online peer-to-peer communities involve an inherently political dimension that cannot be handled by pure protocols and algorithms.

The first part of this paper reveals the peculiarities of Bitcoin, proposes its underlying political economy, and traces the history of the project from its inception to the current crisis. The second part analyzes Bitcoin’s governance structure, which can be understood as a two-layered structure: on the one hand, an infrastructure that seeks to govern user behavior through a decentralized peer-to-peer network, and on the other hand, an open source community of developers who design and architect that infrastructure. We explore the challenges faced by these two layers, the solutions adopted to guarantee the sustainability of the system, and the unacknowledged power structures they involve. In the third part, we reveal the invisible politics of Bitcoin, both embedded in the implicit assumptions of the technology it relies on and in the highly centralized and largely undemocratic development process. We argue that the entire system displays a highly technocratic power structure, as it is built on automated technical rules designed by a small number of experts with limited accountability. Finally, drawing on the broader framework of Internet governance research and practice, we argue that some form of social institutions may be needed to ensure accountability and protect the legitimacy of the entire system – rather than relying solely on technology.

1. Theory and Practice of Bitcoin

A. The Bitcoin Project: The Political Economy of an Untrustworthy Peer-to-Peer Network

Historically, money has taken many different forms. Far from being a purely economic tool, money as a whole is closely tied to social and political systems – what Nigel Dodd refers to as the social life of money (Dodd 2014). Indeed, money has often been used as a tool to shape society in certain ways, and as Dodd suggests, this includes a strong utopian dimension: for example, sociologist Georg Simmel defined an ideal social order in terms of “perfect money” (Simmel 2004). The post-economic crisis in particular has seen the emergence of alternative currencies or exchange frameworks that aim to establish different social relations between individuals – more egalitarian, or less prone to accumulation and speculation (North 2007). But on the other hand, the ideal of a self-regulating market has often sought to disentangle money from existing social relations, leading to a gradual “decontextualization” of commercial interactions from their sociocultural contexts (Polanyi 2001 [1944]).

Since it first emerged in 2009, the decentralized cryptocurrency Bitcoin has raised high expectations for a potential restructuring not only of banks and financial institutions, but also of power relations in society more generally. However, the potential consequences of this innovation are profoundly contradictory. On the one hand, Bitcoin can be presented as a neoliberal project, as it evokes Friedrich Hayek and Milton Friedman’s ambition to end the state monopoly over the production and distribution of money (through central banks) (Hayek, 1990), or as a liberal dream aimed at reducing government control over the economy (De Filippi, 2014). On the other hand, it has also been framed as a solution for greater social justice, by undermining the oligopolistic and anti-democratic arrangements between big capital and government, which are conducive to solving economic crises and inequality. Both claims hinge on the fact that, as a socio-technical assemblage, Bitcoin appears to offer a solution, “governance without government”, which appeals to liberal sentiments on both the left and the right. Its implicit political project can therefore be understood as relying on technology to effectively get rid of politics.

More generally, distributed networks have long been associated with a redistribution of power relations, due to the elimination of single points of control. The main explanation for the approach to telecommunications routing is the adoption of circuit switching to packet switching in the 1960s, the deployment of the Internet Protocol Suite (TCP/IP) since the 1970s (Abbate, 1999), and the adoption of the end-to-end principle – which has proven to be a compelling but also partially misleading metaphor (Gillespie, 2006). The idea is that information can flow through multiple channels and unfiltered, thus bypassing any attempts at control or censorship and providing a basis for more equal social relations and stronger privacy. In practice, however, network design is much more complex, with additional software protocols and hardware at various layers of the network that can (and have) provided alternative forms of re-centralization and control, and network structures that are not subject to other interferences such as legal and regulatory models (Benkler, 2016). This becomes clear.

However, there have been a number of attempts to redecentralize the web, most of which have adopted peer-to-peer structures rather than client-server alternatives, with the underlying assumption being the individual freedoms and “equal commitments” (Agre, 2003) that such technical solutions can provide. Other techniques have also been employed to increase functionality regarding user privacy, including, for example, routing methods (Dingledine, Mathewson, & Syverson, 2004) and cryptography (which predates computing, e.g. Kahn 1996). In particular, since the late 1980s such ideas have been strongly advocated by an informal collective of hackers, mathematicians, computer scientists, and activists known as crackpots, who see strong cryptography as a means of achieving greater privacy and security of interpersonal communications, especially in the face of overreach and abuse by government agencies. Indeed, in terms of their social and political consequences, all of these solutions pursue implicit or explicit goals that can be summarized as enabling self-organization between individuals interacting directly, without reliance on coordination by third parties, and preventing any form of surveillance or coercion.

However, cryptography is not only useful for protecting the privacy of communications; combined with a peer-to-peer architecture, it can also serve as a means to further promote decentralization and disintermediation. In 2008, a pseudonymous entity called Satoshi Nakamoto published a white paper on the cryptography mailing list (metzdowd.com) describing the idea of ​​a decentralized payment system based on a distributed ledger with cryptographic primitives (Nakamoto, 2008a). A year later, the first implementation of the ideas defined in the white paper was released and the Bitcoin network was born. It introduced its own national currency (or unit of account) with a fixed supply – the issuance of which is regulated and can only be achieved through dedicated technical means. The Bitcoin network can therefore replace at least some of the key functions of central banks and other financial institutions in modern society in terms of money, on the one hand, currency issuance, and on the other hand, the trust functions of banks and other central clearing houses.

Supported by many self-proclaimed libertarians, Bitcoin is often presented as a monetary system that is able to bypass most state-backed financial institutions – and all their shortcomings and vested interests that became very apparent during the 2008 financial crisis. In fact, in contrast to traditional centralized economic structures, Bitcoin’s monetary supply is not controlled by any central authority, but is defined by the Bitcoin protocol – precisely stipulating the total number of Bitcoins that will ever be created (21 million) and the rate at which they will be issued. On average, a certain number of Bitcoins are created every ten minutes, and are distributed as rewards to those who dedicate their computing resources to protecting the Bitcoin network in order to run and secure the network. In this sense, Bitcoin can be said to mimic the properties of gold. Just as gold cannot be created out of thin air, but needs to be extracted from the earth (through mining), Bitcoin also requires a special kind of computing work – also known as mining – in order for the network protocol to generate new Bitcoins (just as gold gradually becomes harder to find as the stock is depleted, and similarly the number of Bitcoins created through mining decreases over time).

The creation and maintenance of a currency has traditionally been considered a key task of the state and a core institution of a democratic society. Controlling the money supply, through different means, is one of the main tools available to shape the economy in the context of domestic and international trade. However, whether you believe it or not, the state has the right (or duty) to intervene to regulate the market economy, and monetary policy is sometimes used by certain governments as a tool to finance the government by means of inflation (such as in the case of the Argentine Great Depression of 1998-2002). Perhaps the most important fact is that with the introduction of fractional reserves, commercial banks gained the ability to (temporarily) increase the money supply by making loans that are not backed by actual funds (Ferguson, 2008). Fractional reserve banking (with the tendency of commercial banks to create money at an unsustainable rate) is considered to be a major factor leading to the 2008 global financial crisis – making the issue of private money issuance a topic of public discussion (Quinn, 2009). In a fractional reserve banking system, commercial banks have the right to obtain credit through lending or investment while holding reserves that are only a small fraction of their deposit liabilities – thereby effectively creating money out of thin air.

While there have been many attempts to build alternative currencies, and cryptocurrencies have been debated for a long time, the creation of the Bitcoin network was largely a response to the social and cultural events that emerged during the 2008 global financial crisis. As Satoshi Nakamoto has articulated on various blogs and forums, Bitcoin aims to eliminate corruption from the world of currency issuance and exchange. Given that governments and central banks are no longer able to ensure the value of fiat currencies and other financial instruments, Bitcoin was designed as a trustless technology that operates solely on mathematics and cryptography. Paradoxically, this trustless technology is precisely what is necessary to build a new form of “distributed trust” (Mallard, Medel, & Musiani, 2014).

Trust management is a classic problem in peer-to-peer computing and can be understood as the confidence that a peer has in ensuring fairness and security, for example, when interacting with another peer, during a transaction or downloading a file, and especially against malicious actions and collusion schemes (Zhu, Jajodia, & Kankanhalli, 2006). To address this problem, Bitcoin brings two fundamental innovations that, taken together, are the network's self-governance and self-sustainability capabilities. The first innovation is the blockchain, which relies on public-private key cryptography and hashing algorithms to create a decentralized read-only and tamper-proof database. The second innovation is proof-of-work, a decentralized consensus protocol that uses cryptography and economic incentives to encourage people to operate while ensuring the security of the network. The Bitcoin protocol thus represents an elegant, but purely technical solution to the social trust problem - which usually relies on trusted authorities and central institutions to solve the problem. With the blockchain, trust is delegated to the technology to the extent that individuals who do not know each other (and therefore do not necessarily trust each other) can now transact with one another on a peer-to-peer basis without the need for any intermediaries.

Thus, Bitcoin uses cryptography not only to preserve transaction confidentiality, but also to create an untrustworthy infrastructure for financial transactions. Cryptography in this context is simply a system of discrete symbols (DuPont, 2014) that is used to increase the autonomy of the system to operate independently of any centralized third party. It relies on simple cryptographic primitives or building blocks (SHA256 hash function and public key cryptography) to solve the double-spending problem found in many virtual currencies in a decentralized manner. The scheme adopted by Bitcoin (Proof of Work) relies on a peer-to-peer network of validators (or miners) who commit their computing resources (hashing power) to the network to record all valid transactions in a chronological order into a decentralized public ledger (aka blockchain). All valid transactions are recorded as a block, which contains a reference (or hash) to the previous block – so that any attempt to tamper with the order or content of any past transactions will inevitably result in a noticeably discontinuous blockchain.

By combining various existing basic cryptographic primitives, Bitcoin has created a system that is provably secure, virtually unshakable, and probabilistically unbreakable – all this without any centralized authority responsible for monitoring the network. Bitcoin is a completely open and decentralized network, designed so that anyone can freely use the network and contribute to it without any previous identification. However, contrary to popular belief, Bitcoin is neither anonymous nor privacy-friendly. Instead, anyone with a copy of the blockchain can see the history of all Bitcoin transactions. In fact, decentralized verification requires that every transaction can be verified by all nodes in the network, and every transaction ever made on the Bitcoin network can be traced back to its origin.

In summary, the Bitcoin protocol embodies a profoundly market-driven approach to social coordination, based on assumptions of rational choice (Olson, 1965) and game-theoretic principles of non-cooperation (von Neumann & Morgenstern, 1953 [1944]). This (self-)regulation of the overall system is primarily achieved through the alignment of the mutual interests of all participants involved in the system’s governance, through the system’s perfect information (the blockchain) combined with a consensus protocol and incentive mechanism (proof of work). Social trust and other dimensions of coordination (such as loyalty, coercion, etc.) appear to be explicitly removed from the system’s ideal of exchange organization in accordance with Hayek’s (Hayek, 1976, p. 107ff).

B. From the beginning to the crisis

1. A brief history of Bitcoin

The history of Bitcoin – although short – contains a very intense series of events that led to the decentralized cryptocurrency becoming the most widely used form of digital cash. The story begins in October 2008, with the release of the Bitcoin white paper (Nakamoto, 2008a). In January 2009, the Bitcoin software was released, the first block of the Bitcoin blockchain (the so-called genesis block) was created, and 50 Bitcoins were issued. Soon after, the first Bitcoin transaction took place between Satoshi Nakamoto and Hal Finney – a famous cryptographer and prominent figure of the cryptography movement in the 1990s. It was not until a few months later that Bitcoin finally gained a value comparable to legal tender and began to be accepted by a small number of merchants, slowly entering the commercial sector.

In the early days, Satoshi Nakamoto actively contributed to the source code and worked with many early adopters. However, he was always careful to never reveal any personal details in order to keep his identity secret. To this day, people still don’t know the true identity of Satoshi Nakamoto, despite the various theories that have been proposed. In a sense, Satoshi Nakamoto is a perfect mirror to his brainchild, Bitcoin – a technology that uses alternative technology to trust, so that the parties to a transaction do not have to identify each other. Over the years, several people have been named Satoshi Nakamoto – including: Michael Clear (an Irish graduate student at Trinity College); Neal King, Vladimir Oksman and Charles Bry (who filed a patent application for an updated and distributed encryption).

In the following months, Bitcoin adoption continued to grow, slowly but steadily. However, the real peak in Bitcoin’s popularity was not due to increased adoption by commercial players, but rather the creation of the Silk Road in January 2011 – an online marketplace that relied on Tor (mostly for illegal drug transactions) and Bitcoin to maintain the anonymity of buyers and sellers. The Silk Road paved the way for Bitcoin to enter the mainstream, but also led to several concerns raised by many government agencies that Bitcoin could be used to create black markets, evade taxes, facilitate money laundering, and even support the financing of terrorist activities.

In April 2011, to the surprise of many, Satoshi Nakamoto announced in a public mailing list that he was no longer working on Bitcoin. I moved on to other things he said, before disappearing without further reason. However, before doing so, he transferred control of the Bitcoin client source code repository to Gavin Andresen, one of the main contributors to the Bitcoin code. However, Andresen did not want to be the sole leader of the project, thus allowing control of the code to four other developers – Pieter Wuille, Wladimir van der Laan, Gregory Maxwell, Jeff Garzik. Those who are given administrative rights to the development of the Bitcoin project are called core developers.

As Bitcoin’s popularity continued to grow, so did business opportunities and regulatory issues. However, with Satoshi Nakamoto’s exit, Bitcoin was left without any leading figure or institution that could speak on its behalf. This was the reason for innovation, and in September 2012 the Bitcoin Foundation was formed – a US lobbying group focused on regulating, protecting and promoting Bitcoin. With a board of directors that included some of the biggest names in the Bitcoin space (including Gavin Andresen himself), the Bitcoin Foundation aimed to do for open source software what the Linux Foundation had done for open source software: pay developers to work on the project full-time, establish best practices, and most importantly, bring legitimacy and build trust to the Bitcoin ecosystem. However, questions were raised about the legitimacy of such a self-selected group – many of which had questionable connections or were allegedly associated with specific Bitcoin scams – as the reference and public face of Bitcoin. Aside from the irony of a decentralized virtual currency like Bitcoin being represented by a centralized, profit-driven organization, it quickly became clear that the Bitcoin Foundation was actually incapable of assuming this role. Plagued by a series of financial and management issues, with some of its former board members under criminal investigation and much of its funding drying up, today the Bitcoin Foundation has lost much of its credibility.

But even the fall of the Bitcoin Foundation does not seem to have had a significant impact on Bitcoin – probably because the Foundation was merely a facade that never had the ability to effectively control the virtual currency. Over the past few years, Bitcoin adoption has continued to grow, ultimately reaching a market cap of nearly $7 billion. Bitcoin still has no public image, no actual institution that can represent it. Yet, people continue to use it, both to maintain its protocol and to conduct an increasing number of commercial (and non-commercial) businesses that rely on its technical infrastructure. To date, although some Bitcoin-specific regulations have been enacted (e.g., the New York State BitLicense), most regulators around the world have not adopted a way that would significantly affect the regulation of Bitcoin (De Filippi, 2014).

Thus Bitcoin continues to operate, and continues to be used (by many) as an open-source software platform, relying on a decentralized peer-to-peer network governed by distributed consensus. However, if one understands why Bitcoin was created in the first place, and its eventual adoption by different categories of people, it becomes clear that the original concept of Bitcoin as a decentralized platform for avoiding financial turmoil has gradually become compromised with the social and cultural context in which the technology operates.

After the first wave of adoption by the crypto-expert community, computer geeks and crypto-libertarians, a second (large) wave of adoption emerged after the Silk Road in 2011. But what really made Bitcoin mainstream was the new opportunities for speculation in the cryptocurrency, as investors from all over the world began to accumulate Bitcoins (either by buying or by mining) with the sole purpose of generating profits through speculation. This trend clearly reflects the established social, economic and political order, which is governed by the capitalist accumulation of value and profit maximization. Therefore, even a decentralized technology specifically designed to promote disintermediation and avoid financial turmoil cannot protect itself from the inherent tendencies of modern capitalist society, namely to concentrate wealth and power in the hands of a few (Kostakis & Bauwens, 2014).

The illusion of Bitcoin as a decentralized global network has been challenged with the emergence of large mining pools, mostly from China, that now control 75% of the network. But that’s only part of the problem. It makes a simple – but highly controversial – protocol issue clear that despite the open source nature of the Bitcoin platform, the governance of the platform itself is highly centralized.

2. Block size controversy

To many outside observers, this controversial issue seems too specific. As mentioned earlier, the blockchain that underpins the Bitcoin network consists of a series of blocks that list the sum of transactions executed so far. For a number of reasons (mostly related to protecting the security and stability of the system and ensuring easy passage), the size of these blocks was originally set to 1Mb. In practice, however, this technical specification also sets a limit on the number of transactions that can be processed by the chain in a specific period of time. Therefore, as Bitcoin's adoption grew, this arbitrary limit (originally considered harmless) became a focus of heated discussion - on several Internet forums, blogs, and conferences - and sparked significant controversy in the Bitcoin community (Rizzo, 2016). Some people believe that the 1M limit effectively prevents Bitcoin from scaling and is therefore a significant obstacle to its growth. Others believe that many solutions can be found to solve this problem without increasing the block size (such as off-chain solutions that would offload the load from the main Bitcoin blockchain). They insist that it is necessary to maintain the limit for security reasons and ideological reasons, and that it is a prerequisite for keeping the system more inclusive and decentralized.

On August 15, 2015, after failing to reach any kind of consensus on the block size issue, a subproject was proposed. Due to frustration expressed by other Bitcoin developers about formally raising the block size limit (Hearn, 2015), two core developers, Gavin Andresen and Mike Hearn, released a new version of the Bitcoin client software (Bitcoin XT) that accepted and produced the potential for an 8MB block size increase. The client was a fork of the original software or client (Bitcoin Core). Bitcoin XT was released as a soft fork, which could potentially become a hard fork when a certain set of conditions were met. Initially, the software remained identical to Bitcoin Core, except that all blocks mined using the Bitcoin XT software would be "signed" as XT. This signature acted as a voting proxy: starting on November 11, 2016, in the event that at least 75% of all the latest 1,000 blocks had been signed as XT, the software would begin accepting and producing blocks with a maximum block size of 8MB – in a straight line with the limit doubling every two years. This marked the beginning of an actual hard fork, resulting in the emergence of two blockchain networks with two different and incompatible protocols.

It sparked a lot of debate among the core developers and eventually led to a full-blown conflict that has been described as a civil war within the Bitcoin community (Hearn, 2016). One of the BitcoinCore developers, Gregory Maxwell, was a strong proponent of keeping a 1Mb cap. According to him, increasing the block size cap would constitute a risky change to the fundamental rules of the system and would make Bitcoin more centralized – since Bitcoin itself would mean that less powerful machines (such as home computers) would no longer be able to continue processing the blockchain, making the system more susceptible to control by a few large computers and mining pools. Similarly, Nick Szabo – a well-known cryptographer who has been involved in the cryptojacking community since its early days – declared that increasing the block size so quickly would soon constitute a huge security risk that could jeopardize the entire network. Finally, another argument against the Bitcoin XT proposal is that increasing the block size could lead to variable, delayed confirmation times (since larger blocks cannot be verified every ten minutes).

In the wider Bitcoin community, the conflict has caused a lot of battles on major online forums that represent the main source of information for the Bitcoin community (Reddit Bitcoin Information, Bitcoin.org, etc.). Many people accused Bitcoin XT of using populist arguments and alarmist tactics to get people to support them. Others claimed that by promoting a hard fork, Bitcoin XT developers were doing exactly what the Bitcoin protocol was designed to prevent: they were creating a way for everyone to spend the same bitcoin twice from two networks. In some cases, this conflict ended up leading to outright censorship and bans of Bitcoin XT supporters from the most popular Bitcoin websites. Most importantly, the conflict has also led to various personal attacks on Bitcoin XT supporters, with several network operators stating that Bitcoin XT supporters have experienced distributed denial of service (DDoS) attacks. For example, Coinbase, the largest Bitcoin wallet and exchange company in the United States, was removed from Bitcoin.org after they announced that they would experiment with Bitcoin XT.

In the face of these events, Mike Hearn, a core developer and key instigator of Bitcoin XT, decided to resign from developing Bitcoin in light of the low support in the Bitcoin community for Bitcoin XT – which he believed was on the verge of technological collapse. Hearn denounced his emotional response to the block size debate, pointing to the Nakamoto legacy as an explanation for the major disagreement among designated Bitcoin core developers.

But the conflict is not over. Bitcoin XT was only the first in a series of improvements to the Bitcoin protocol that were subsequently proposed. Bitcoin XT failed to gain mass adoption and was ultimately abandoned on January 23. New proposals to address the block size issue were proposed (e.g., Bitcoin Unlimited, Bitcoin Classic, BitPay Core). The most popular today is probably Bitcoin Classic, which proposes to increase the block size cap to 2MB (instead of 8) by adopting a scheme like Bitcoin XT (i.e., after 75% of Bitcoin miners will support the new format). An interesting aspect of Bitcoin Classic is that it also plans to establish a specific governance structure that aims to promote more democratic decision-making on code changes through a voting process that will consider the opinions of miners, users, and developers on the boundaries of the wider community. Bitcoin Classic has received support from relevant participants in the Bitcoin community, including Gavin Andresen himself, who currently accounts for 25% of the Bitcoin network nodes.

It is at this point in time that it is difficult to predict where Bitcoin will go. Some may think that the Bitcoin experiment has failed and that it is not going anywhere; others may think that Bitcoin will continue to develop as a network for the settlement of payment obligations and a safe haven asset in underserved and hard-to-access markets; and many believe that Bitcoin will still go to the moon and continue to surprise us over time. But one thing is certain: regardless of the robustness and technical feasibility of the Bitcoin protocol, this governance crisis and conflict resolution failure highlights the fragility of the Bitcoin project’s current decision-making mechanisms. It also highlights the tension between the (theoretically) decentralized nature of the Bitcoin network and the highly centralized governance model that has emerged, which ultimately relies on the goodwill and aligned interests of only a very small number of people.

2. Bitcoin governance and the challenges it faces

Governance structures are set up to adequately achieve collective goals, maintain social order, channel interests and preserve power relations under check, while ensuring the collective legitimacy of the actions taken. Because they are closely related to trust issues, which are key aspects of social coordination and are addressed by online socio-technical systems through a combination of informal interpersonal relationships, formal rules and technical solutions in different ways (Kelty, 2005). As for communities of online peers, there are two decisive basic characteristics in shaping their governance structures, namely that they are volunteer-driven and that they pursue self-organization (Benkler, 2006). Therefore, compared to traditional forms of organizations such as companies and enterprises, they often require alternative means of implementing coordinated actions (Demil & Lecocq, 2006)

Nicolas Auray states that while the nature of online communities can vary greatly (from Slashdot to Wikipedia and Debian), they all face three major challenges that need to be addressed in order to thrive (Auray, 2012):

• the definition and protection of community boundaries;

• The establishment of incentives for participation and confirmation of investor identity;

• Finally, the conflict is resolved.

Understanding how each challenge was addressed in the case of the Bitcoin project is particularly difficult because Bitcoin is composed of two separate, but highly interdependent layers involving very different coordination mechanisms. On the one hand, at the infrastructure level: a decentralized payment system based on a global *trustless* peer-to-peer network that operates according to a specific set of protocols. On the other hand, at the designer level: a group of developers and software engineers entrusted with a key role in the development of this technology.

The Bitcoin project can therefore be said to consist of at least two different types of communities – each with its own boundaries and protection mechanisms, rewards or incentives, and mechanisms for resolving conflicts. One is the community of nodes within the network, including passive users who simply use the network to pass currency, and “active” users (or miners) who contribute their computing resources to the network to support its operations. The other is the community of developers who are contributing code to the Bitcoin project to maintain or improve its functionality. What the above crisis reveals is the difficulty of establishing a governance structure that properly connects these two dimensions. As a result, a small group of individuals became responsible for the long-term sustainability of a large collective open source project, which quickly declined once they could not reach consensus among themselves and were prone to interpersonal conflicts.

This section will describe the specifics of the two-layered structure of the Bitcoin project and the mechanisms for addressing these key challenges to better understand any shortcomings they may display.

A. Bitcoin Network: Governance through Infrastructure

As mentioned earlier, the Bitcoin network claims to be autonomous and self-sustaining.19 As a trustless infrastructure, it functions independently of any social institutions. The rules governing the platform are not enforced by any single entity but are instead embedded directly into the network protocol that every user must follow.

Given the open and decentralized nature of the Bitcoin network, its community boundaries are very flexible and dynamic, in that everyone can freely participate in the network and do not contribute to the network – whether as a passive user or as an active miner. However, when it comes to protection methods, the decentralized characteristics of the network create significant challenges, mainly due to the lack of centralized institutions responsible for regulation. Through the proof of work mechanism, Bitcoin thus enables network technology solutions to resist malicious attacks (such as the so-called Sybil attack), intended to make the spoofing network expensive. However, so far, although the protocol has proven successful, it still has received a lot of criticism. In addition to the high computational cost of proof of work, the Bitcoin network can also be determined by capital. If one or more participants want to control at least 51% of the computing power, they can verify a block of arbitrary censorship transactions through others (the so-called 51% attack).

Through consensus state recognition, by creating a non-trust-based infrastructure that is completely unrelated to the identity of the participating node, the Bitcoin protocol eliminates the root of the problem. In Bitcoin, there is no centralized authority to assign network identifiers (or accounts) to each node. Therefore, the concept of identity and status is eradicated from the system, the only important thing – ultimately – is the number of computing resources provided to the network by each node.

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Therefore, although the original design was a fully decentralized network dominated by distributed consistency, in practice, the Bitcoin network has evolved into a highly centralized network dominated by the growing oligopoly market structure.

Finally, in response to the conflict resolution problem, it is important to determine what constitutes a conflict at the level of Bitcoin’s infrastructure. If the purpose of the Bitcoin protocol is to reach a consensus for a decentralized network peer on the correct transaction (or block) setting for the Bitcoin blockchain record, then the conflict will arise, and both blocks (both valid from a purely mathematical point of view) are registered in the same block by different network participants – thus creating competition for the same blockchain for two versions (or forks). Because there is no way to decide which blockchain should be better than other blockchains, the Bitcoin protocol implements a specific fork selection strategy provision, that is, if there is a conflict on the network, the longest chain will win. Again, for the first two mechanisms, the rule of the longest chain is a simple and direct mechanism to resolve conflicts that arise within the Bitcoin network by relying on – fully exclusive – technical means.

Obviously, this suggests that SatoshiNakamoto and early Bitcoin developers aim to create a decentralized self-sufficiency payment system. Perhaps naive, they thought it was possible to create a new technological infrastructure that could manage their own, through their own protocols and rules – without any third-party intervention in order to maintain themselves. However, despite the mathematical elegance of the entire system, once the technological systems tend to develop in unforeseen ways in a specific socio-economic context, they may also fall into unpredictable power relations.

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Therefore, it is worth considering whether it is - the technical rationality of the independent Bitcoin protocol - the Bitcoin network can actually get rid of any form of external regulatory and/or sanctions, or whether, in order to ensure proper integration (assimilation) in the social, economic and cultural context of modern society, such a technological product, the Bitcoin network may require some form of supervision and arbitration mechanism (inside or outside the system) to protect legitimate market dynamics, as well as to ensure a reasonable level of consumer protection and financial stability in the system.

B. Bitcoin designer: Governance infrastructure

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In fact, since its inception, SatoshiNakamoto is the principal person in charge of managing the project, and the only person with the right to submit code to the official Bitcoin library. Only in the latter stage, when Satoshi begins to depart from the Bitcoin project, that power is eventually transferred to a small group like 'core developers'. So, like many other open source projects, there is a difference between the people who can provide input to the project (in general, the community) and those who ultimately ask where the project will develop. In fact, while anyone has the right to submit modified software (such as bug fixes, incremental improvements, etc.), only a few individuals (core developers) have the right to decide which changes should be included in the main branch of the software. This makes sense, in part because the correct evaluation of the proposed changes requires a high level of technical expertise, and also – more implicitly – based on the fact that the core developers have been commissioned to take care of the project, citing their involvement (and, to a certain extent, shared awareness) with the original concept of Satoshi Nakamoto.

With this in mind, we can now provide a second angle for the 3 key challenges facing Bitcoin and analyze how they are handled from a designer’s perspective: Bitcoin developers.

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Specifically, consensus formation among Bitcoin core developers has formally established a process called Bitcoin’s Improvement Proposal (BIPS) that relies on managing processes in the Python programming language (PEPS or Python enhancement recommendation). Historically, these two processes (sometimes explicitly refer to) share similarities with methods that can be considered “standards” to reach consensus formation for designing and documenting network protocols: RFC or solicitation for the creation and development of Internet protocol suites (Flichy, 2007, p. 35ff). The BIP process requires that all source code and documentation releases can be made available to anyone, so it can help multiple people explore and improve them. However, the last call for whether to implement changes will ultimately depend on the extent to which core developers evaluate the public support, a suggestion has been made and consensus among them:

Using the BIPs system is quite free and transparent, and it is not involved in community decision-making. Exceptions are very rare, and conservative is always preferred in this case when a decision is controversial and cannot be agreed upon. BIP is not considered a standard protocol until formally activated. And to activate a BIP requires community consensus, which requires the support of Bitcoin users.

This description briefly outlines the legitimacy and accountability that dominates the relationship between Bitcoin designers and users. Although everyone can participate in this open community, only a small number of people who keep intervention to a minimum have decision-making power. However, at the end of the day, the sovereignty of the entire project is in the hands of Bitcoin users and developers. If the core developers intend to modify the code against the will of the entire community (especially the wishes of miners), the community may directly refuse to run the new code. This can be seen as a form of "negative rights" or a model of "market-based governance", which ensures that the legitimacy of the code is fully in the hands of the users.

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Lastly, conflict management may be the most difficult problem for consensus-oriented communities. Because of improper solution, impasses and disagreements are prone to occur. Take Wikipedia for example, a community regards specific mechanisms of mutual supervision as the basic method of conflict management, but regulatory procedures for regulation and sanctions are set up in case of complaints (Auray, 2012, p. 225). The Debian community is also known for its complex and cumbersome procedures and rules (Lazaro, 2008). Although impasses and disagreements cannot be avoided, these communities also try to remain inclusive in the process of measuring problems. They limit the occurrence of private disputes and life attacks by shifting controversial issues from substantive reasons to procedural reasons.

But the Bitcoin community clearly lacks conflict management solutions. As mentioned above, failure to reach an agreement on the dispute has caused the Bitcoin project to undergo an actual fork. A fork is a software choice provided to the user group of two or more software, and the user needs to make a choice. The adoption rate will determine which branch project wins in this competition, otherwise they will evolve into two branches of the same software. Fork is a standardized practice in the development of free-development source software. It is the last solution when it is desperate, but it can sometimes threaten the survival of the project (Robles & González-Barahona, 2012). It can also be seen as a key factor in the governance mechanism. Fork code means that developers have basic free choices of code for developing source projects, but this freedom also poses a split threat to the community where developers are closely linked. (Nyman & Lindman, 2013)

In short, in these three levels (boundary definition, status confirmation and contradiction management), the management of Bitcoin’s projects is dependent on its leaders, so there is a view that this will lead to the emergence of oligarchical forms (Shaw & Hill, 2014). In classic Weber-style language, it is: as seen in online communities, Bitcoin’s management is based on a charismatic dominance form (O'Neil, 2014), and is largely based on assumed technical expertise. The recent crisis experienced by the Bitcoin community reveals the limitations of consensus reached between individuals driven by different political and economic interests, and also reveals the contradiction between the overall goal of the project (i.e., self-regulating decentralized virtual currency and payment systems) and the over-concentration of the rights of the technical elites who manage the project.

3. The invisible politics of Bitcoin

The Latin Vires inNumeris (i.e., numerical advantage) is the motto imprinted on the first physical Bitcoin wallet—which may be a satire of the “we believe in God” printed on the dollar. In the early days, Bitcoin’s political goals could be clearly seen in the desire for ever-changing individual and state power. Yet some people use Bitcoin as a tool for their own political views (such as the so-called cypherpunks and crypto-libertarians), while others believe that the technological tools themselves do not have a real political ideology. In fact, one of the core advantages of Bitcoin is that it is not within the scope of government, politics and central bank manipulation. But we do not need Lenovo to find that it still wants to keep its organization in a political dimension (Kostakis & Giotitsas, 2014).

Local decentralization essentially affects the political structure by deleting control points. Regarding Bitcoin, decentralization is achieved through a peer-to-peer payment system independent of any third party. The result is that Bitcoin not only questions the privilege of government issuing and regulating currencies, but also the legitimacy and necessity of existing financial institutions. On the one hand, as a decentralized financial trading platform, Bitcoin limits the ability of central banks and other financial institutions to define terms and conditions, and controls the execution of financial transactions. On the other hand, Bitcoin blocks provide people with a method of coordinating themselves without relying on third parties and other authoritative institutions, and therefore may also give people more freedom. Bitcoin blocks have high hopes for direct interaction between individuals outside of a payment system through various forms, which will also help achieve long-term democratic goals by improving the level of social structure and self-organizing capabilities (Clippinger & Bollier, 2014).

As Bitcoin develops, it will eventually be used more widely, and it will face more technical challenges (such as related issues with block scalability). Due to different political positions, this technology may continue to infringe on the interests of existing social and government agencies, so it will also encounter a variety of social and political challenges.

Bitcoin’s false view is that once technological management is achieved, the need for centralized management of government agencies and regulate social interactions disappears ( Atzori, 2015; Scott, 2014). Politics will gradually concessions to new types of technology-driven protocols to promote social collaboration, which is seen as a more effective way to achieve collective goals through individual cooperation (Abramowicz, 2015).

However, it is impossible for us to get rid of politics by relying solely on technical support, because technology itself is closely linked to the broad dynamic of rights. As Yochai Benkler said, freedom in complete constraints cannot be perfect freedom, only different types of constraints that must be chosen (Benkler, 2006). As an unreliable technology, Bitcoin may simply escape the political framework of current government and market institutions, but it still does not escape the invisible politics of a few people, project developers, which largely determines its function.

The implicit Bitcoin governance structure is that Bitcoin core developers with technical expertise (and a small number of technologists) are the most likely to think of the right decisions that should be implemented on the platform, and such a technocratic approach to governance goes against the original concept of Bitcoin. There is a clear contradiction between the liberal-minded agency as an institution that is not regulated by any third party and its highly centralized and undemocratic management structure. Although the former's political dimension has been praised or at least recognized by many, the latter is not publicly publicized to the public for a long time. Bitcoin's technological decisions are not publicized as a political decision, so there has been no discussion.

Discussions on block size are a good example of this trend. Although this discussion is defined as a technical discussion of neutral nature, most views are about supporting or opposing enlarging block size, so this is actually a potential political discussion. In fact, except for a few questions about the need to maintain system security, most of the views discussed are about the socio-political impact of technological choices (e.g., supporting more financial transactions and protecting the decentralized nature of networks). However, as long as the questions are proposed in the scope of rationality and technical choices, the political dimensions that these choices may involve will not be publicly recognized.

Furthermore, if one believes that all artifacts have politics (Winner, 1980) and technologies within the social framework (Kallinikos, 2011), the design and characteristics of the Bitcoin platform should consider not only its technology (such as security and scalability issues), but also its political and social impact on society as a whole.

In many cases, consensus is difficult to reach, especially when issues regarding social justice need to be resolved, so politics has the necessity to exist. Social organizations are also often faced with the challenge of inclusive of different interests and values. The approach adopted by modern liberal democracies involves factors such as propaganda and debate. The only way to ensure joint decisions of legitimacy is to open up contradictions and discuss issues within the public (Habermas, 1989).

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We need to understand that the political intention behind technology cannot be solved by technical methods. Although technology can be used to guide and mediate social interaction problems, it should not and cannot be the only or main driver of social change. As Bitcoin shows, it is unrealistic to manage human organizations by calculating rules. To ensure the long-term sustainable development of these institutions, it is very necessary to establish a management structure in the technical framework that can allow democratic discussion and consultation, but more importantly, make decisions on how technology develops. Therefore, we should note that the decision-making process should include not only technology builders such as developers and software engineers, but also people such as technology users who will be affected by decision-making.

Different Internet dimensions have been analyzed within the Internet management framework (DeNardis, 2012; Musiani et al., 2016), and provide important insights on the behavioral dimensions of underlying software and protocols and their already put into use. These have proven to be beneficial for better understanding and developing the governance structure of Bitcoin projects, being intermediate regulators rather than commanders.

Conclusion: Bitcoin within a broader Internet governance structure

As a complex socio-technical structure, the Internet adopts different types of measures, including social norms, legal rules and procedures, market practices and technical solutions, which together form a management and power structure (Brousseau, Marzouki, & Méadel, 2012). Most research on Internet governance focuses on the interaction between infrastructure and superstructure or institutions, especially those that occur in the history of networks (such as ICANN or IETF), which sometimes conflict with existing domestic and foreign legal frameworks, private enterprises, and even civil society (Mueller, 2002; Mueller, 2010; Mathiason, 2009; DeNardis, 2009; Bygrave & Bing, 2009).

For years, Internet management has been flooded with friction, disputes and disputes, and this international struggle to grasp control of the basic rules and protocols of the Internet has been described as a global war (DeNardis, 2014). To some extent, some “preliminary consensus and running code” based on seemingly simple IETF rules, and even the much praised Internet protocol governance model actually contains quite a lot of power struggles, even a dictatorial design (Russell, 2014). It is easy to reach consensus on technical issues because it involves only objective standards and actual observations (i.e. useful and useless), and ignores the fact that “the story of standards must be about power and control”, they either concretize or change existing conditions, always shaping the future in a specific way through conscious efforts (Russell, 2012).

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Lessons learned from past cases of success and failure of the Internet can be used as a guide to experience or to avoid making the same mistake again. What we must admit is that social and technological systems can ensure self-management and independence through technology. Any technology will ultimately be deeply affected by social, political and cultural pressures in the environment, which may also lead it to grow or develop in an unpredictable direction. (Akrich, 1989; MacKenzie & Wajcman, 1999)

The Bitcoin project has undergone significant changes over the years, which are caused by both endogenous and exogenous causes of the system. The Bitcoin network has also rapidly expanded from a small network run by computer wizards who are eager to try out new liberation technologies (Diamond, 2010) to a global network with growing demands and expectations from users and stakeholders.

Discussions on block size have created a practical division in the Bitcoin community, which also indicates the need for a more democratic governance system. Different arrangements implemented at different levels of network governance have their own unique forms of deliberation and decision-making procedures. (Badouard et al., 2012) In the process of Bitcoin development, it may be possible to improve the status quo by introducing another governance structure that takes into account other dimensions besides technicality, especially considering the economic, political and social impact.

The Bitcoin Foundation is the first organization to try to develop in this direction, although it has never previously established itself as a standardized organization due to the lack of legitimacy and accountability of the governance structure. The centralized governance subject responsible for the future development of the Bitcoin project has obviously failed to obtain any form of legitimacy in the Bitcoin community, because the purpose of the Bitcoin network is to eliminate the need for trusts or other central powers. The technology-led approach that Bitcoin currently aims to build governance structures by technical means (infrastructure governance) has also proved doomed to fail, because a purely technical system cannot take into account the entire scope (and complexity) of full social interaction. In this regard, a major limitation of the Bitcoin protocol is that it is based on quantifiable algorithms and verifiable operations (such as how many resources people invest in the network?), and therefore cannot reward those who contribute to the network in different ways rather than through computing power.

A more interesting approach would involve using the underlying technology—blockchain. This is not a regulatory technology that technically executes a set of special predefined protocols and rules (such as Bitcoin), but rather as a platform where people can write code rules and procedures themselves and define a specific management system, defining it as a special blockchain feature that can benefit from (such as transparency, traceability, accountability, and anti-corruption), but also leaving room for institutional frameworks other than network operations. This also ensures that technology remains a tool that people can use to enable and support new governance models.

Given the nature of the present experiment and the lack of mature technologies, it is difficult for us to predict at a specific point in time what is the best strategy to ensure that the Bitcoin project is in the interests of all stakeholders. However, regardless of the approach taken, we believe that the governance structure of the Bitcoin project can only be achieved by publicly acknowledging its political dimensions and eliminating the technocrats within the power structure and institutional frameworks that adapt to technology and political functions in the current Bitcoin project.