RPT-Bitcoin has a governance problem, no matter who created it

(Repeats Friday item)

* Bitcoin founder claims provoke fresh bitcoin bickering

* System needs to evolve to handle rise in transactions

* But lead developers squabble, freeze out one of their

* System needs “adults” to make decisions – U.S. professor

By Jemima Kelly

LONDON, May 6 As one would-be father of bitcoin
falls by the wayside, squabbling among the web-based currency’s
lead developers is exposing a fundamental flaw: it must evolve
to meet growing demand, but may lack a governance structure to
achieve this.

The latest bickering erupted after Australian entrepreneur
Craig Wright promised to prove he was the mysterious creator of
bitcoin – which allows users to move money across the world
quickly and anonymously – but then said on Thursday he could not
provide further evidence to back this up.

Wright stopped short of reneging on his claim to be Satoshi
Nakamoto, assumed to be a pseudonym for the person or people who
launched the digital cryptocurrency in 2009. However, he
apologised for damaging the reputations of bitcoin experts who
had believed him.

Many members of the bitcoin community reckon this is all a
distraction and agree with Wright when he said that the identity
of Nakamoto “doesn’t, and shouldn’t, matter”.

“Satoshi’s biggest achievement was to create a system that
doesn’t require his participation to run,” said Peter Todd, one
of bitcoin’s core software developers. “That’s what makes all
this stuff kind of funny. It’s like searching for the creator of
a system that’s designed not to require a creator.”

While grey-suited central bankers print conventional
currencies and commercial banks control transactions in them,
no one person or entity is in charge of bitcoin. Instead it runs
on a decentralised system of shared trust without any
third-party verification of transactions – one reason why many
people are attracted to it.

Critics, however, say it needs a “benevolent dictator” or at
least some “adults” to manage the expansion that it needs to
cope with the increasing number of transactions. Someone, or
some group, must decide how to meet users’ requirements, they

Trades are handled by thousands of “mining” computers around
the world which validate blocks of transactions by competing to
solve mathematical puzzles every 10 minutes.

The first computer to solve the puzzle clears the
transaction and is currently rewarded with 25 new bitcoins, now
worth around $11,250.. This is how the computers’
owners cover their costs – largely power bills – and make a
profit. The system also ensures there is no single point in the
system that might fail.


In practice, there do appear to be people who can make
decisions, but it is also possible to be excluded from this
magic circle.

One of the bitcoin experts who initially believed Wright’s
claim is Gavin Andresen. Nakamoto handed control of bitcoin’s
software to Andresen when he stepped aside in 2011, a transfer
that kept the creator’s identity a mystery as it was conducted
in cyberspace without human contact.

Andresen later shared that control with others. But when he
stated publicly he believed Wright, sceptical developers
responded by revoking his “commit access” to a shared repository
of bitcoin rules.

Initially, these developers justified their move on security
grounds, saying his computer must have been hacked – something
Andresen denied. When Reuters asked Todd whether Andresen’s
access would be reinstated, he responded: “Heck no”, saying a
belief in Wright amounted to “inexcusable incompetence”.

Andresen admitted to bewilderment over whether he still
believed Wright’s claims. “Ask me in six months; I don’t trust
my own judgement right now after all the drama,” he said on

The squabbling is not new. One of the lead developers, Mike
Hearn, stood down from bitcoin in January because of a power
struggle nicknamed the “bitcoin civil war”.

Hearn and Andresen had proposed increasing the size of the
blocks in which transactions are processed but the other
developers opposed this. In quitting, Hearn said that “what was
meant to be a new, decentralised form of money that lacked
systemically important institutions” had now become “a system
completely controlled by just a handful of people”.

Many investors and start-up firms remain optimistic about
bitcoin and are making money from it. But Emin Gun Sirer, a
computer science professor at Cornell University, said the
appearance of internal conflict was undermining it.

“For bitcoin to retain its value, it’s important to have
hope that there’s good management in charge, that there are
adults in charge,” Sirer said. “When we see opportunistic moves,
that’s a problem.”


But Sirer also said that any open-source project such as
bitcoin, which runs using software that anyone can access,
change, and distribute, faces the challenge of governance.

“Is it a pipe dream to expect to be able to build a currency
system that is completely decentralized and free of any control
whatsoever? The short answer to that is yes, but that’s not what
anyone should have expected anyway,” he said.

Sirer added that he was concerned that his brightest young
students at Cornell were being deterred from getting involved
with bitcoin because of the in-fighting and the appearance that
developers were unable to agree on change.

One other digital currency system which is attracting bright
young minds is Ethereum, created in 2013 by Russian-Canadian
Vitalik Buterin when he was just 19. It works with the
“benevolent dictator model”, as Sirer calls it, with Buterin
holding the decision-making power.

“Over the last couple of years it’s become apparent that
having a static protocol is just not a viable approach,” Buterin
told the Consensus bitcoin conference in New York earlier in the
week. “Software has to evolve … and there has to be some
mechanism for agreeing on how software is going to upgrade.”

Most, however, reckon that even if Nakamoto were to be
found, the other developers – many of whom have written more
code than he ever did in the seven years since bitcoin was
launched – would not accept his having ultimate power.

“(Nakamoto) would be thanked for creating this amazing
thing, but if there comes a time when there’s a technical debate
over whether we should go one way or the other, his opinions
would only be persuasive, not controlling,” said Jerry Brito,
executive director of bitcoin advocacy group Coin Center.

(Additional reporting by Toby Sterling in Amsterdam; editing by
David Stamp)

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