Sunday, March 26, 2017

Bitcoin may not have a 'central bank', but it does have small groups seeking control over monetary policies

In the ongoing battle between two groups over control of the future of Bitcoin, a more important question needs to be raised regarding the true 'decentralization' of the crypto-currency.  And that is, if a small oligarchy of individuals (programmers) have control over the blockchain platform that runs Bitcoin, then does this same group have the power any time they see fit to institute monetary policies similar to the way the Federal Reserve does for the dollar?

Right now there are two opposing factions fighting over what is being termed as the 'Bitcoin Fork', and each have differing agendas for the future of Bitcoin.  One of the groups is known as Segregated Witness (Segwit), and is interested primarily in expanding the blocks that facilitate Bitcoin transactions and casually speeding up network functionality.  And while this group seeks dominion over the process, another group that calls themselves Bitcoin Unlimited has a much more aggressive agenda as they want to perform a complete overhaul of the current Bitcoin network.

And because of this inability to come to a consensus between the two factions, Bitcoin has the real possibility of splitting into two unique crypto-currencies running under the same umbrella.


But for holders and users of Bitcoin, just the fact that a small group of programmers can have control over the technology and institute changes as they see fit should bring about a note of caution since this means that anything, including the number of total coins mined, could be changed dependent upon the desires of the winning faction.  And in the end the ability to determine 'monetary policy' for Bitcoin means that there is a centralized body that has the power to dictate the direction and future of the crypto-currency.

Right now Bitcoin also acts as a corporation of sorts, with Bitcoin miners acting as a 'Board of Directors' and able to participate in voting for and against future policies.
Vogel explains that the ability to vote for changes to Bitcoin is essentially proportional to the computing power that each miner contributes to the Bitcoin network. This explains the fact that Bitcoin is based on Proof of Work (PoW). Vogel also notes that there is no preset voting period, so miners can vote for changes to Bitcoin at any time. In theory, this is a very elegant and unique way of handling the evolution of Bitcoin, although it does mean that the interests of miners guide the direction of Bitcoin. 
This explains why statements credited to top miners within the industry regarding Bitcoin scaling usually have a significant impact on both Bitcoin price and its general behavior. - Coin Telegraph
In the end, Bitcoin is not as decentralized as many believe, with decisions able to be made by the most powerful 'miners', and carried out by programmers who are not always in consensus on how the future of Bitcoin is to be determined.  And this also means that if either of these factions are one day co-opted by a government, a Wall Street entity, or some other group that doesn't believe in the ideals laid forth by Satoshi in the creation of the crypto-currency, then Bitcoin can very easily lose its fundamental benefits and morph into just another fiat currency no different than the dollar, the euro, or the yen.

0 comments:

Post a Comment