It’s been said that “Blockchain technology is not as decentralized as we think” and that critical decisions are made, not democratically, but by a
It’s been said that “Blockchain technology is not as decentralized as we think” and that critical decisions are made, not democratically, but by a small group of “agents of influence” often including founders, software developers, miners and other parties with a monetary interest in the matter.
This notion is open to debate, of course, but accepting that this is the case today, would it necessarily hold in the future too? Especially when Bitcoin or Ethereum, or any other blockchain network, has billions of users and, for the sake of argument, plays a critical role in the world economy?
Say Bitcoin’s network becomes the platform upon which most global payments are made. At that point (if not before) would the network be deemed a “public good” that is subject to some sort of government or a super government oversight?
That is, key decisions would now be made not just by developers and node operators, but also by an international consortium of economists, scientists, engineers and public administrators. Perhaps even headed by a political appointee?
In the event of a global cataclysm, could this governing consortium even change some of Bitcoin’s foundational principles, like its issuance limit of 21 billion BTC?
A utility working for the common good?
This notion of a public good or utility that operates in the public interest goes back to English common law “when key economic players such as ferry operators had to fulfill certain obligations to the public,” writes Dave Yost. In the 1890s, the United States began codifying common-carrier and public-utility law after predations by railroad barons like Cornelius Vanderbilt, who once shut down a bridge he owned to rival railroads trying to enter New York City, causing market havoc.
While “public goods” have a technical definition, they are usually recognized as commodities or services available to all members of society — local, national or global — like highways or public education, or clean air. They are often regulated by governments.
“In some ways, blockchain networks like Bitcoin already meet the economic definition of a public good,” Garrick Hileman, head of research at Blockchain.com, tells Magazine. After all, anyone can use the Bitcoin network, even users or builders of rival networks. As for governance, blockchains also possess “a very effective means of settling governance disputes,” adds Hileman. “Participants that aren’t happy with a change — or the lack of change — can simply fork a blockchain to implement their idea. The marketplace then serves as an arbiter over competing blockchain design choices.”
That sounds fine in principle, but in the real world things don’t always work out so neatly, others counter. “You may have heard that in cryptosystems, you don’t have to trust humans and their fallible corrupt natures — you just have to trust math. […] this statement is just inaccurate,” said Angela Walch, a professor at St. Mary’s University School of Law, while testifying before the United States Senate Committee on Banking, Housing and Urban Affairs in July: Walch added:
“Crypto economic systems remain subject to human flaws and corruption, whether in how the software is coded, whether the game theory designed to operate the system is robust, or whether miners collude to exploit their power to order transactions in the blockchain record to their benefit.”
The Economist, too, recently questioned the governance bona fides of decentralized finance projects built upon blockchain networks: “Despite the claims of decentralization, some programmers and app owners hold disproportionate sway over the DeFi system,” adding for good measure that “governance and accountability in DeFi-land are rudimentary.”
“For a long time, crypto people tried to avoid this [governance] question by simply saying that ‘the community’ or ‘the market’ should decide,” Vili Lehdonvirta, professor of economic sociology and digital social research at University of Oxford, tells Magazine. “There’s this romantic idea of a hive mind that everyone can feel part of. But, in practice, this answer is so vague that it tends to allow powerful people and companies to pull the strings in the background.”
Decentralised finance is one of three tech trends disrupting finance—and it has the potential to rewire how the industry works. In our cover this week, we go down the “DeFi” rabbit hole https://t.co/j7G04qDCJ3 pic.twitter.com/UO2mp6ejVG
— The Economist (@TheEconomist) September 16, 2021
Projecting “billions of users”
In a recent interview with Cointelegraph, Dan Held imagined Bitcoin ten years hence following a period of “hyperbitcoinization,” starting with retail users then institutional investors, “and finally, governments getting involved,” at which point Bitcoin has been adopted by billions of users and is the world’s reserve currency.
Is it too much to envision that…
cointelegraph.com