Understanding bitcoin governance
Maybe you’ve heard people say that no entity, whether government or central bank, governs or controls Bitcoin. And this might prompt you to wonder how this digital currency works.
Ideally, Bitcoin isn’t a static protocol. Instead, developers work on it to fix bugs and upgrade the system to maintain the integrity and performance of the protocol. So, who decides about changes to Bitcoin’s protocol?
Bitcoin’s decentralization makes its evolution different from centralized entities where decision-making takes a top-down approach.
Perhaps, this explains why governance may not strictly apply to Bitcoin since it implies a situation with leaders acting as proxies for other people. However, that’s not how this virtual currency works.
While the world has blockchain-supported, decentralized systems that work that way to integrate formal governance approaches like voting to elect leaders or approve proposals, Bitcoin doesn’t work that way.
Instead, Bitcoin’s protocol improvement is a quasi-political process because stakeholders jockey for influence and power. Nevertheless, it’s not a plutocracy, democracy, or formal political process.
Bitcoin’s evolution is a consensus-building process where persuasion and deliberation are vital. However, all participants retain volition, meaning it is an opt-in system with players choosing their ways. What Bitcoin is and becomes is up to the users.
Most importantly, the Bitcoin owner’s default culture is that the protocol won’t change unless essential. That means the vast majority must agree to alter the protocol.
Bitcoin Improvement Decisions
Perhaps, you’re now wondering about Bitcoin improvement decisions and proposals. Upgrading Bitcoin’s code is a formalized process involving Bitcoin Improvement Proposals.
These proposals or BIPs undergo peer review, public debate, and rigorous testing to establish a rough consensus in Bitcoin’s community. The community achieves a rough consensus once most members confirm their satisfaction that the objections are wrong.
Upon achieving the rough consensus, the community integrates the proposals into the Bitcoin software or the Bitcoin Core. Core developers commit access to the code repository to complete this step.
After making it to the code repository, nodes can install the BIP. The final step is essential because end-users maintain control over the cryptocurrency. Only after hitting the nodes’ threshold, an upgrade becomes active.
Who Controls Bitcoin?
Perhaps, the process of creating and implementing or integrating BIPs begins governance for this virtual currency. Ideally, Bitcoin evolution depends on the participants’ consensus. But several entities have voices that influence the upgrade of this virtual currency.
For instance, the activities of traders and investors on platforms like Bitcoin Prime affect the virtual currency’s price. Bitcoin buyers decide on purchasing this cryptocurrency depending on its market value.
Additionally, miners, developers, custodians, wallet providers, end-users, and independent node operators also have a say in Bitcoin’s governance.
Thus, participants in the Bitcoin network are in a constant dynamic power struggle with checks and balances preventing any group from wielding too much influence or power.
Perhaps, Bitcoin’s governance is like internet governance because both have a distributed system. But Bitcoin’s governance process benefits from the current governance mechanism in internet governance. For instance, Bitcoin protocol updates follow the Request for Comments format for the ARPANET, created in 1969.
But the decentralization promise on the internet faded away after some time. Issues like net neutrality, internet access, governments’ role in internet regulation, and data protection have also taken the central stage of internet governance.
It’s also worth noting that Bitcoin’s governance has diverged in certain aspects. For instance, including developers, users, and miners in securing the network and maintaining it differentiates the Bitcoin network from the internet. Thus, no single entity can claim to control or govern Bitcoin.