Bitcoin

Difficult By Design

Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.


Democracy is messy, frustrating, and at times infuriating. But it is at least fair, right? In a democracy, we all get a say in who governs us, and the vote of the poorest, most marginalized citizen carries the same weight as that of a peer of the realm.

Well, up to a point. There are many reasons why democracy is the worst system of government, except for all the others that have been tried, not least because a very small number of people often wield an inordinate amount of power. Readers who remember the 2000 US Presidential Election will recall that just 537 Floridians put George W. Bush in the White House instead of Al Gore. And in the UK’s most recent general election, the Conservatives’ landslide was won on the votes of less than 30 percent of the electorate.

Democracy has taken a battering in recent years, including in the UK where almost half the population disagreed with the EU referendum result. When contests of such moment and magnitude are decided by such fine margins, the wounds they cause cut all the deeper.

Which brings us to Bitcoin, which isn’t just the future of money but can also teach our society a great deal about how we can improve democracy. If that sounds like hyperbole, then I offer the development of Taproot as Exhibit A.

Don’t worry, I’m not going to get too technical, because although Taproot represents the first major update to Bitcoin’s infrastructure since 2017, what’s really interesting is how it’s being implemented, and what this tells us about governance — and where power resides — within the Bitcoin ecosystem.

Taproot involves improving upon Bitcoin’s legacy transaction signature algorithm with something called Schnorr signatures, with the purpose of increasing privacy and delivering greater capabilities to the network, including supporting more complex transactions known as “smart contracts”. It’s set to be one of the most significant advances in Bitcoin’s architecture yet, and support is unanimous throughout the community.

There’s just one problem: for several months now, the community has been arguing about how to add it to the network. And this lack of consensus has delayed Taproot long past the date when it could have been implemented.

So far, so bad? Not in the slightest. The ponderous process of coming to consensus is not a bug of Bitcoin, it’s a feature — and probably one of its most significant superpowers.

Plenty of scorn has been thrown at Bitcoin for its supposedly sclerotic, even “ossified” consensus-building. Ethereum fanbois point to their own culture of moving fast and breaking things which, admittedly, makes for much faster development and implementation. But in Ethereum, decisions are taken by a very small, very select group of leaders who are much more equal than others. It is what I would call a Benjamin Franklin democracy, where two wolves and a lamb vote on what’s for dinner.

Bitcoin on the other hand is not just the closest thing to perfect money: it’s also the nearest we’ve come to a perfect democracy, far more so than any system we currently use for choosing who governs us. When our community debates change that will affect everyone, every vote really does count the same. That’s why it’s taken so long for us to agree on Speedy Trial, the method with which we’re going to implement Taproot onto the network.

This is Bitcoin’s philosophy of vires in numeris writ large. What makes us strong can also make us move slower than rival cryptos. But we get there, and in doing so, we put the workings of our unique democracy on full display, showing that every voice has equal weight and change can only be effected through ultra-majoritarianism. Yes, it can make progress slow-going at times. But this difficulty is by design: it makes Bitcoin invulnerable to a coup by any would-be dictator or oligarchy that seeks to seize control and start implementing fundamental, far-reaching changes that damage the interests of other parts of the community.

All democracies claim to count every vote; only in Bitcoin does your, my and every else’s vote truly count. And while it might delay decision-making a little compared with other cryptos, it ensures we’re always going in the right direction: another reason why Bitcoin remains streets ahead of other digital currencies, and continues serenely down the road to hegemony.

Talking Turkey

And so from one almost perfect democracy to a distinctly imperfect one.

From its food to its beaches to the friendliness of its people, Turkey is in many respects a magnificent country. But it’s hardly a poster child for democracy, languishing at 104th in the annual Economist Intelligence Unit’s Democracy Index.

We shouldn’t be too surprised, then, that Turkey’s government banned Bitcoin last week. Bitcoin adoption has surged in Turkey as its citizens stack sats as a hedge against high inflation that topped 16 percent in March.

Turkey’s central bank made its fears perfectly clear, saying Bitcoin is "neither subject to any regulation and supervision mechanisms nor a central regulatory authority.” Which probably doesn’t make it sound any less attractive to those whose lira savings have melted away over the last few years.

Turkey’s rulers and central bankers can try to ban usage of Bitcoin all they want, but they will get the same sharp lesson that other jurisdictions have learned: not only is it impossible, but attempts to ban Bitcoin only publicises it further and fuels faster adoption. Illiberal laws are no match for human ingenuity combined with Bitcoin brilliance. When India’s central bank imposed a blanket ban on all virtual coins, trading volumes on major Indian exchanges crashed overnight. But almost overnight smart entrepreneurs came along and created peer-to-peer networks that linked buyers and sellers while bypassing financial institutions entirely.

For governments and central banks around the world, the satoshi is taking a long time to drop. How many more “bans” will there be before they realize the futility of working against Bitcoin instead of with it? And that if they sit down with the Bitcoin community and discuss a way forward, everybody benefits? So by all means, bring on the bans, but remember — Bitcoiners will still be here when prohibition has failed, and we’re always be happy to talk turkey.

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CEO

Coinfloor
Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi’s mission and focus is on making it easy for anyone to learn about, invest in, and own Bitcoin, the world's best savings technology.