Refuting Coinbase CEO's Miner Voting Mechanism: Bitcoin Users Should Have a Voice

Editor's note: This article is written by Emin Gün Sirer to refute the views of Coinbase CEO Brian Armstrong in the article "Elegant Upgrade Mechanism of the Bitcoin Network: Miner Voting".

It was painful to read Coinbase CEO Brian Armstrong’s article about the current state of Bitcoin. It was frustrating for two reasons, one technical and the other social.

Armstrong described:

If a majority of Bitcoin miners “vote” for a particular upgrade, then that is of course the new version of Bitcoin.

Let me briefly explain why this is technically wrong and what it indicates as a social problem that we need to address.

User First

When I was an anemic child, my mother fed me spleen every other day “because it builds blood.” Did I have to eat it?

A common misconception is that Bitcoin miners determine the state of the blockchain. And, in fact, one of my academic colleagues fell into the same misconception, thinking that miners could decide to mint 1 million Bitcoins for themselves at any time. I wrote this article at the time to explain these misconceptions.

Perhaps my "football club" example (the executive makes decisions, but needs to consider the interests of the fans, otherwise the fans might shout and shout to drive the executives out of the stadium, or they refuse to enter the stadium and shout outside) is not clear enough and may not work for American audiences. I will try to clarify it with a thought experiment.

If miners can indeed unilaterally determine the state of the blockchain, if they can change the rules, why don’t they do it? If you can mint an extra bitcoin per block, why wouldn’t you do it? If your answer is “because 51% of miners don’t want to do that,” then you need to ask yourself why not. There are already suspicions that Chinese mining pools actually have more than 51% of the hashrate. There have been three previous instances where a single miner has exceeded 51% of the hashrate, but they didn’t unilaterally change the rules. Why didn’t this happen?

Let’s see why: suppose some miner does create a block with a base transaction reward of more than the current 25 BTC. Suppose this miner has the majority of the hashing power. He is able to form a real long chain, longer than the blockchains built by other miners. Yet no one appreciates his weird block. He can only own all the Bitcoins on his own blockchain, but cannot convert them into real wealth. No one respects him. It’s like the money my sister and I minted as children. It could only be used to buy toys between us - we couldn’t buy new toys because the store only accepted real cash.

Would you eat it just because someone offered it to you?

I tried to share this with Armstrong, and his response was “Maybe the right way is that miners have voting rights, and wallets and exchanges have veto power.” This is also incorrect. I’m usually very cautious with analogies for distributed systems, but let’s use one anyway, and at the risk of violating consumer vs. producer cultural biases, this is what I can do: Imagine you live in a town with a big restaurant that has a fat chef, and a small restaurant that has a skinny chef. The big restaurant has 51% of the food production capacity, and you have all the cash in the town (population: that’s you). In this town, does the chef have voting rights, and you as a consumer have veto power? Are you forced to eat the food that the fat chef makes, just because he has a big restaurant? If you still think that’s the case, what happens when he starts serving haggis, spleen, and oysters? If you still think you’re a helpless customer controlled by the fat chef, put yourself in his shoes: what would he do if you threw his plate on the floor, left without paying, and went to the skinny chef next door? How would he exchange his food for dollars? Remember, you are the only one in this town with cash; he needs your cash, and what he has is the offal that no one wants.

The bottom line is that users of Bitcoin, wallets, and exchanges have enormous power. They exercise that power through proxies, such as large companies like Coinbase. Without exchanges like Coinbase, how would miners convert Bitcoin into cash? How would they pay themselves, let alone invest in the next generation of equipment? And I haven’t even mentioned the nasty cost of electricity.

So it shocks me that the CEO of the largest Bitcoin exchange does not recognize his power and his responsibility.

Do miners have rights?

No one should eat this food. It was bleeding when I poked it with a fork and the blood clotted onto the plate.

I didn’t use the question “Do miners have the sole power to decide what to do with the blockchain?” It’s clear that they don’t. Miners only move in the direction that has an interest. The real question is “Do users have the sole power to decide what to do with Bitcoin?”

The answer is that they have supreme power and should be the core players in discussing the evolution of the blockchain, but they need to mediate expectations with miners and core developers.

Users need miners to protect the financial system from attack, though not necessarily existing miners. Therefore, a unilateral break, a complete fork, is possible, but highly unwise. It is also highly unwise from a social perspective, because the mining community is only tolerant; it represents a genuine investment in the beginning, and suddenly destroying that investment would be hostile. I am not excusing miners, but I am trying to illustrate the technical limitations when other things are not considered.

Obviously, if users are affected by a fork without changing the proof-of-work mechanism, miners who don’t like the new rules can use their hashrate to attack the new system. These attacks are nasty – malicious miners with more than 25% hashrate are enough to pose a threat, so any change away from proof-of-work will require enough hashrate to prevent a 26% attack.

Continuing with the thought experiment, in theory users could completely change the rules by changing the proof-of-work mechanism, which would be against the interests of miners. This would make the new system immune to attacks from existing equipment and would cause huge debate in the Bitcoin mining investment industry. It would take us back to the days of profitable GPU mining and bring back Bitcoin botnets. It's not a good return to the past, but Bitcoin's security has actually been good all along. Because Bitcoin has a high market cap, an uncontrolled PoW change could inspire attacks that were not feasible before. However, of course there can be a controlled change in the thought experiment with the support of a reserve mining pool.

It is clear that users would be wise to work with miners to get the 75% of the miners' benefits. Mining equipment becomes obsolete every 18 months, so miners can adapt to major changes with enough lead time. At that time, miners can easily reach consensus on changes to the blockchain. For the reasons I mentioned above, they have no agenda and there is no hash power vacuum, partly because players are not aware of the dynamic changes.

Core development strength

The tripe is often mentioned by the Scots. Compared to the spleen, it is the marzipan. Again, you don't have to eat it.

The trickier issue is developer benefits. There are so few developers, and without a way to compensate them, it's not advisable to alienate the core developers. "Core developers" means people who actually contribute to the code, not those who argue on the mailing lists. In fact, we can abandon the latter group and be financially well off. The core developers at the front are the ones who actually improve the code, and they are important.

My instinct is that new development should be agreed upon by the majority of developers. It’s hard to find competent developers who are familiar with the code, and if they leave, we’ll only have the idea guys (who are usually men in Bitcoin)! But developers are also replaceable and difficult to get along with, and it’s not worth it to try to please one person in an open source project.

People who don't meet their expectations usually make other decisions. They also have high switching costs, which in economic terms is called stickiness.

But now that many talented Bitcoin developers are working for companies, the situation has changed. We should not stand still. Coinbase and other A16Z-funded companies should focus on keeping the community decentralized and distributed. This will allow A16Z to better integrate with the forefront of Bitcoin development and research, which is exactly what they lack.

The smart thing to do now is to accept this reality, but encourage more developers to be interested in Bitcoin, blockchain, and fintech. Any sensible VC that has made money from it, has done so much commercial activity, and invested so much money in open source projects needs to work hard to foster a healthy ecosystem. This includes encouraging new developers and finding ways to compensate community-driven open source contributions.

Social issues

The colon is another serving of food that has not yet been consumed.

Furthermore, I am frustrated by the lack of leadership in the Bitcoin space. Bitcoin has many technical problems: it takes 10 minutes to confirm a transaction, it has a maximum throughput of 3 transactions per second, and it is vulnerable to many more attacks than people realize. But all of these can be overcome. We know how to create blockchains that confirm transactions in seconds, and scale to tens of thousands of transactions per second. We know how to prevent these attacks (here and here).

What is difficult to solve is the social problem: Bitcoin is trampled by many scams, the community does not want to admit these problems, so no measures are taken to solve them, the few capable developers are concentrated in a few companies, and the community has been emphasizing that this is contrary to scientific truth. It is difficult to make progress in such an environment: no wonder these discussions are attacked by malicious DDOS and anonymous virus emails. With a considerable number of existing Bitcoin Foundation personnel serving sentences, it is difficult to find unbiased and informed community leaders.

Because of this, VCs and Bitcoin companies have taken a lot of flak. While some of them are working hard to promote Bitcoin, what I’ve learned is that no one is putting in the effort to improve the community. If anything, they’re just encouraging the enthusiasm of those eccentric fans to increase the value of their company’s stock. From what I’ve observed – there have never been academic papers attacking Bitcoin, but there have been attacks on core developers, and the current block size expansion dispute is already in trouble.

As the saying goes, with great power comes great responsibility. Exchanges as a group are even more powerful than miners. Real power comes from the ability to impact the real world. Miners alone cannot do this. Exchanges are the ones who can make this happen.
Therefore, Brian and other Bitcoin exchange CEOs, please strive to get a seat at the table for changes to the Bitcoin blockchain. You represent the interests of users and should work with miners and core developers to get the right results for ordinary Bitcoin users. It is your right and your responsibility to mobilize the power of users.

Original article: http://hackingdistributed.com/2016/01/03/time-for-bitcoin-user-voice/?platform=hootsuite
By Emin Gün Sirer
Translator: Next (8btc.com username)
Bitcoin address: 1Mwmes1CAwgvy5SEpjPAkbnp94BYtsRw66
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-user-voice ‎)